(Bloomberg) -- The Russell Reconstitution is a big deal every year, but this time, potential changes for GameStop Corp (NYSE:GME). and AMC Entertainment (NYSE:AMC) Holdings Inc. make it interesting for a broader swath of investors than normal.
The annual reconstitution of Russell’s U.S. family of indexes accounts for market changes in the previous year, and it affects more than $10.6 trillion in investor assets benchmarked to, or invested in, products based on the Russell U.S. Indexes, according to its website. Trading volumes on U.S. exchanges also tend to be among the heaviest of the year around the event.
Will AMC and GameStop be moved into the large-cap Russell 1000 from the small-cap Russell 2000? The key date was May 7.
The reconstitution ranks and market cap breaks for the Russell Indexes are determined based on information available on rank day -- this year, May 7 -- according to Catherine Yoshimoto, FTSE Russell’s director of product management. An existing Russell 2000 index member would have had to have a total market cap exceeding $7.3 billion in order to move into the Russell 1000 index, she said.
Going by that, AMC -- with a market cap of $4.28 billion on May 7 -- would fall short of inclusion, while GameStop and its $11.97 billion market cap would make it.
As of Friday’s close, after big rallies in the last month, GameStop had a market capitalization of $18.4 billion. AMC’s is $24.6 billion.
The reconstitution process is pretty formulaic: There’s a whole cottage industry of analysts who predict changes to the indexes in advance with high accuracy. A preliminary ranking is done by Russell on May 7. The first round of information was announced on Friday, with the preliminary list of additions and deletions from the Russell 3000 (that’s a combination of the Russell 1000 and Russell 2000).
Here are key quotes from Friday’s press release:
- “The market capitalization breakpoint which separates companies in the U.S. large-cap Russell 1000 Index and companies in the U.S. small-cap Russell 2000 Index increased by 73% from $3.0 billion in 2020 to $5.2 billion for 2021.”
- “The closely-watched final index membership lists, with breakouts for the Russell 1000 Index, the Russell 2000 Index and the Russell Midcap Index, will be published on Monday, June 28 when the Russell Reconstitution takes effect and the newly reconstituted indexes begin to operate.”
(Corrects June 6 story to show that potential inclusion in Russell 1000, Russell 2000 is based on companies’ market value on May 7, not June 25.)
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