Visteon's market capitalization, currently less than $850 million, pales in comparison to the $4 billion market cap that companies typically have to carry to garner S&P 500 consideration. The auto supplier, whose market cap has frequently slipped below $1 billion this year, was bumped when S&P decided to allow Viacom Inc.'s (VIA VIAB) CBS Corp. (CBS CBSA) split-off into the fund, David M. Blitzer, managing director & chairman of the S&P's Index Committee, told Dow Jones Newswires. Viacom had been trading as a single entity and was already in the S&P 500.
"Visteon's removal was dictated by the fact its market cap dipped far below what was reasonable," Blitzer said. He said Visteon was among the bottom-performing companies in the 500 Index.
S&P did not have any communication with Visteon prior dropping it from the index, Blitzer said. Visteon spokesman Jim Fisher said the company had no comment on S&P's decision.
The move is likely to trigger a selling of Visteon shares by some institutional investors, Argus Research Corp. auto analyst Kevin Tynan said. Many funds strictly hold S&P 500 companies, while other funds have some flexibility in how they use the 500 Index as a benchmark.
Shares of Visteon recently traded at $6.43, down 43 cents, or 6.3%, on volume of 1.95 million compared with average daily volume of 2.2 million. The shares had fallen as low as $6.38 Wednesday morning. Over the past 12 months, the company's stock has underperformed the entire S&P 500's 12-month performance by about 30%.
The auto supplier's stock fell as low as $3.14 on May 11 prior to a bailout orchestrated by former parent Ford Motor Co. (F) in May. Ford agreed to take 23 North American manufacturing plants and facilities from the company and grant its top supplier price increases, loans and advanced payments. The bailout immediately sent Visteon shares above $8, and Visteon shares eventually neared $11 as details of Ford's bailout became clearer.
The Ford deal should add between $1.7 billion and $1.8 billion to fourth-quarter earnings. The gains will be offset by a 40% decline in revenue triggered by the transfer of business to Ford and the decision to exit unprofitable sectors of the auto parts industry.
The Street has soured on Visteon in recent months amid the company's $200 million third-quarter loss and added restructuring plans. The Van Buren, Mich., auto supplier has identified more than 20 facilities worldwide representing as much as $4 billion in revenue that are either unprofitable or noncore - or both - that need to be fixed in coming years.