Peugeot Dropped From CAC 40 Index as Its Value Dwindles

Peugeot Dumped From CAC 40 Index as Carmaker’s Value Dwindles
Peugeot shares have been trading near a 26-year low in recent months as Europe’s economy struggles. Photographer: Fabrice Dimier/Bloomberg

PSA Peugeot Citroen, Europe’s second-largest carmaker, will be removed from France’s leading stock index after the company’s shares declined more than 60 percent in the last 12 months.

The French manufacturer, which trails only Volkswagen AG among the continent’s carmakers, will be replaced by Solvay SA in the CAC 40 index on Sept. 24, NYSE Euronext said late yesterday in an e-mailed statement. Jean-Baptiste Mounier, a spokesman for Peugeot, declined to comment.

“Peugeot has been the weakest weight in the index for several quarters now,” Christophe Wakim, a quantitative analyst at Exane BNP Paribas, said in an interview with Bloomberg TV before the decision. “It’s just the reflection that Peugeot, unfortunately, has destroyed value for its shareholders.”

Peugeot shares have been trading near a 26-year low in recent months as Europe’s economy struggles. The automotive division has been burning through 200 million euros ($250 million) in cash a month for the last year, Chief Executive Officer Philippe Varin said in July as the company reported an 819 million-euro first-half net loss.

The stock advanced as much as 5.1 percent today and was up 4.8 percent at 6.33 euros at 12:46 a.m. in Paris, while the CAC 40 rose 1.1 percent. Solvay, a maker of chemicals and plastics, gained as much as 4.7 percent in Brussels and was up 4.4 percent at 92.80 euros.

The index change reflects European carmakers’ woes as they struggle to cut costs amid declining vehicle sales. Peugeot has been a member of the CAC 40 since the creation of the index in 1987. Its weighting has dropped by about three quarters since then to about 0.22 percent, making it the smallest member. Renault SA, France’s second-biggest carmaker, represents about 1.13 percent of the gauge.

Board Rules

The decision to remove Peugeot came after a meeting of NYSE Euronext’s seven-member scientific board, led by Roland Bellegarde, executive vice president for European listings and cash trading at the transatlantic stock exchange. Reviews take place every quarter.

The board is guided by the number of shares available, known as free float, as well as market capitalization and revenue trends, NYSE Euronext said in a separate statement. The board picks “the most representative” stocks, it said.

The last criteria is the “most sensitive” one, as Peugeot employs about 100,000 people in France, Florent Couvreur, an analyst at CM-CIC Securities, said by phone. “Its shares are indeed very low, but their price could double quickly if macroeconomic conditions improved.”

Share Decline

Stocks that are deleted from the CAC 40 usually underperform the index over the year following their exit, according to Exane BNP Paribas. The average decline is about 15 percent, analysts at the brokerage said in a note.

“This decision can be both negative and positive” for Peugeot, CM-CIC Securities said in a note sent to clients today. “Negative, because on the short term this could lead to the disinvestment by some index-backed investment funds. Positive, because the stock will be less under the spotlight and thus less subject to short-selling.”

Peugeot shares have traded in Paris since 1925. Solvay shares started being listed in Paris on Jan. 23. Its admission by NYSE Euronext in Paris followed its acquisition of Rhodia SA for $6 billion last year. Brussels remains its reference market, and 70 percent of its shares are available to be traded, according to Euronext.

“Constituents of the CAC 40 index don’t necessarily need to have Paris as the reference market,” Caroline Tourrier, a spokeswoman for NYSE Euronext in Paris, said by phone. “Solvay now employs about 7,000 people in France, which makes it a fully representative company in France.”

Continental AG, Europe’s second-largest auto-parts maker, returned to Germany’s benchmark DAX index after a four-year absence in a sign of its recovery from debt woes that encouraged a takeover bid from Schaeffler AG.

Among several changes in the gauge of Germany’s 30 biggest listed companies, MAN SE was removed after Volkswagen AG increased its stake in the truckmaker to more than 75 percent, Deutsche Boerse AG, the Frankfurt-based exchange operator that controls the index, said in a statement on Sept. 5.

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