As we reported here earlier today, Sirius XM Radio was impacted when MSCI Barra Indexes reconstituted their funds today. We wanted to get that news out in a time-frame that could offer some solid information to investors in the aftermath of the event. Now we will offer some additional clarity.
Sirius XM was deleted from the MSCI US SMALL CAP 1750 INDEX and added to the MSCI US PRIME MARKET 750 INDEX (See details here). Many equities impacted by the reconstitution all had swings in share price or volume on the move.
The natural response by many investors is why this was unknown prior to happening. The fact is that there are hundreds of index funds in existence, and tracking them all would be a huge challenge. In many instances, companies that are traded in some index funds may not even be aware of their inclusion. What investors can learn from this is that there will reconstitution's with MSCI going forward, and the index is now on our radar screens. As frustrating as this situation is, it gives us knowledge for the future. Were there people, traders, or institutions that were aware that this was going to happen. You Bet there was. Next time they wont have the advantage because now we know what to watch for.
So why did Sirius XM suffer if it was added to one index and deleted from another? The obvious answer is that the index it was added to likely carries far fewer shares than the index it was removed from.
Position - Long Sirius XM Radio