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Revamped and Streamlined Article:
Hey there! Let's chat about some shakeups happening in the stock market. Here's the lowdown:
Every now and then, some stocks bid adieu to the DAX family, while others join the party. This happens every three months, when the index operator decides which companies get to join the selection indices DAX, TecDAX, MDAX, and SDAX. The DAX, MDAX, and TecDAX are reviewed twice a year, while the SDAX gets a quarterly revamp.
But there can be surprises along the way. In case companies merge, go bankrupt, or their free float drops below a certain threshold, extraordinary adjustments to the indices might occur—and that's happening now.
Sayonara, Nexus; Hello, About You!
According to ISS Stoxx, a subsidiary of Deutsche Börse, the clinic software specialist Nexus will bid SDAX a tearful goodbye as early as next Monday. The company falls short of the 10% free float threshold required for index inclusion, as US financial investor TA Associates now owns around 95% of the company.
Nexus's departure will make room for the online fashion retailer About You. Ironically, one acquisition target is replacing another, as Zalando announced a 1.13 billion euros offer for About You in December. Zalando already holds three-quarters of the shares. Formycon will step into About You's shoes in the TecDAX.
Index Shuffles: Pros and Cons for Investors
For investors, a change in an index's stocks can offer both benefits and downsides. Inclusions can give investors a boost from increased visibility, but departures might fan the flames of a downward spiral.
For the overall market, changes in the SDAX have less impact than a reshuffle in the DAX, which can sway entire sectors. However, any change does have an impact on the composition of certain ETFs, requiring adjustments. The current changes in the SDAX and TecDAX might have more consequences for direct investors, but they're not entirely unexpected.
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Note of Disclosure: The board and majority shareholder of the publisher Börsenmedien AG, Mr. Bernd Fötsch, holds direct and indirect positions in Formycon financial instruments mentioned in the publication, which could potentially benefit from the resulting price developments.
[1] Source: DAX Index Constituents: As of 27/01/2023
[2] Source: SDAX Index Constituents: As of 27/01/2023
- The clinic software specialist Nexus, falling short of the 10% free float threshold, will depart from the SDAX, making way for the online fashion retailer About You to join, creating an interesting dynamic in the finance sector.
- The ongoing changes in the SDAX and TecDAX bring potential benefits and drawbacks for investors, as these shifts can provide increased visibility for inclusions but may initiate a downward spiral for departures, particularly for direct investors.
