Standard & Poor’s 500
The index before the opening of trading on Friday, to replace it
Advance auto parts
who will move into the S&P SmallCap 400 index, the S&P Dow Jones Indexes said late Monday.
The action could lift shares of Kenvue (ticker: KVUE) ahead of Friday’s addition as index funds, which control an estimated 20% of the S&P 500, buy shares in Kenvue, the consumer health company that owns brands like Band-Aid. , Tylenol and Listerine.
Johnson & Johnson
(JNJ) (JNJ) stock could come under pressure due to index selling, as a result of the S&P 500’s underweight after Kenvue’s exchange offering.
Johnson & Johnson said Monday that there is strong interest from owners in the $35 billion swap offer for Kenvue that expired last week. As a result, J&J owners who choose to participate will be able to swap only a fraction of their shares for Kenvue. The exception is that holders of less than 100 shares of J&J who elect to offer all of their shares on the exchange offer will not be subject to proportionality.
J&J will swap 1.53 billion shares of Kenvue for about 191 million shares of its own stock. The exchange ratio is approximately eight Kenvue shares for every J&J share. The initial ratio estimate is 23.8%, which means that the holder of 1,000 shares of J&J would see 238 shares of J&J exchange for Kenvue and keep the rest.
Kenvue stock rose 0.1% Monday to $22.90 and was up 0.7% in after-hours trading, to $23.06. J&J fell 3% on Monday, to $167.35. Arbitragers were buyers of J&J and sellers of Kenvue before the end of the swap offer on Friday for a spread of about 7%, but that activity ended on Monday.
Adding Kenvue to the S&P 500 would result in about 300 million Kenvue shares being bought by indexers and more than 30 million J&J shares sold. That could boost Kenvue and lower J&J stock before adding to the S&P 500 on Friday. Kenvue has about 1.9 billion shares outstanding and the public offering will be about 1.7 billion shares after the exchange offer. J&J retains a 9.5% stake in Kenvue, which J&J floated in May.
J&J will have less weight in the S&P 500 due to pulling its shares from the exchange offering, which amounted to a large Kenvue-funded buyback.
There could be very active trading late Thursday in Kenvue before the S&P 500 is added.
S&P Dow Jones Indexes recently said it plans to add Kenvue to the S&P 500 after the exchange offering but did not specify when. This news came on Monday.
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