Ocado (OCDO.L) is set to be demoted from the FTSE 100 (^FTSE) index following a troubled period that saw its price plunge.
The online grocery delivery firm boomed in lockdown, with its share price hitting a record 2,895p in September 2020. But the easing of restrictions put the company on the back foot as consumers returned to supermarkets.
The online grocer’s stock market value has more than halved in the past 12 months and is expected to drop down into the FTSE 250 (^FTMC) after the markets close this Wednesday.
FTSE Russell, which manages the make-up of London’s indexes, will announce its quarterly reshuffle at 5pm today.
Read more: FTSE 100 and European stocks open lower ahead of key vote on US debt bill
The FTSE 100 is a share index of the 100 most highly-capitalised companies listed on the London Stock Exchange. Any company that falls to 111th and below is automatically ejected from the top-flight index, while any firm that rises to 90th or above is automatically promoted.
Ocado saw a £501m loss last year and topped the Financial Conduct Authority’s list of ‘most-shorted’ stocks in London.
The group, which had a value of more than £21bn in 2020, is now worth less than £4bn.
The firm has also suffered from weaker-than-expected demand for its robotic warehouse technology. As a result, the stock has tumbled over 85%.
The changes will be announced after the market closes this Wednesday, based on the companies’ closing share prices the day before.
“Shopping basket sizes have been shrinking at Ocado and the retail side of the business can’t benefit from the surge in demand to shop in bricks and mortar stores once more,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“But the falling share price also demonstrates that investors are losing patience with Ocado Solutions, which is meant to be the long-term powerhouse of the company, but demand for robotic technology for warehouses remains weaker than hoped, with fewer deals than expected coming through.”
The online grocer is not alone in the FTSE 100 demotion area. Johnson Matthey (JMAT.L), British Land Co (BLND.L) and Frasers Group (FRAS.L) were all at risk of automatic demotion from the FTSE 100, according to investment platform Interactive Investor.
British Land has lost more than 20% in share value and Frasers about 16% over the last three months.
However, this reshuffle isn’t just about companies being demoted from the big league of the London Stock Exchange. Some companies will be smiling at the close of the markets as they are promoted to the UK’s blue chip index.
Birmingham-based IMI (IMI.L), formerly Imperial Metal Industries, is in the pole position for promotion into the premier index from the FTSE 250.
Its share price has jumped by more than 20% year-to-date and a guidance boost in early May means its stock is up 2.5% so far this month.
IMI, which designs fluid control technology for sectors like energy, life sciences and industrial automation, saw turnover increase by 10% to £2.05bn in 2022.
The company also said the integration of recent acquisitions, including Blackburn-based Heatmiser, would unlock new opportunities for growth.
Read more: UK savers missing out on hundreds of pounds amid ‘measly’ bank rates
Hikma Pharmaceuticals (HIK.L) and Diploma (DPLM.L) are also set to join the blue chips in this reshuffle.
“IMI is well-known to seasoned investors, previously having been a FTSE 100 stalwart in its days as Imperial Metal Industries and having been previously relegated in December 2014.
“Hikma, meanwhile, has had a recent chequered past which has seen the company in and out of the premier index on more than one occasion,” according to Interactive Investor,” Richard Hunter, head of markets at Interactive Investor, said.
Looking at the mid-cap index, contractor Capita (CPI.L) is poised to return to the FTSE 250.
Despite a high-profile cyber attack in April that will cost it £20m, analysts and the firm say boss Jon Lewis’s turnaround is bearing fruit.
Watch: Blow for London as another FTSE 100 firm eyes primary listing in New York
Download the Yahoo Finance app, available for Apple and Android.
