S&P: BDCs no longer eligible to be in U.S. indices


"After consulting with clients concerned with certain reporting requirements, expenses, and investment restrictions relating to business development companies (BDCs), S&P Dow Jones has decided to remove all identified BDCs from its U.S. Indices.

BDC ETFs: BDCL, BDCS, BIZD

Earlier: Prospect Capital (PSEC -2.7%) is removed from the S&P 600 SmallCap Index and Apollo Investment (AINV -7.3%) is removed from the S&P 400 MidCap Index.

Prospect's market cap is $3.4B, Apollo's $1.9B. Other BDCs with market caps over $1B: Fifth Street (FSC -0.8%), Ares Capital (ARCC -1.5%), American Capital (ACAS -1.7%), Main Street (MAIN -1.7%), Hercules Technology (HTGC -2%). Close enough to $1B for an argument: Solar Capital (SLRC -1.8%) and Golub Capital (GBDC -0.2%).

Comments (40)
  • diddyp20
    , contributor
    Comments (57) | Send Message
     
    What does this mean?
    25 Feb 2014, 12:27 PM Reply Like
  • Tommy the Cork
    , contributor
    Comments (78) | Send Message
     
    A gobbledegook press release. "All BDC"s??? "
    25 Feb 2014, 12:34 PM Reply Like
  • Interesting Times
    , contributor
    Comments (14937) | Send Message
     
    It means a great buying opportunity.. Check out my blog for additional information..

     

    http://seekingalpha.co...

     

    Top 20 blog and all are invited...Open discussions daily !
    25 Feb 2014, 03:12 PM Reply Like
  • rvshaw
    , contributor
    Comments (117) | Send Message
     
    It means you have a great opportunity to buy BDC's at a lower price. A price that has temporarily dropped for no REAL reason. If you read virtually all comments related to $PSEC, most are using this as a great opportunity to buy. $AINV is dropping because the are issuing more shares (a common BDC move that enables the BDC to increase the size of its business).
    25 Feb 2014, 12:41 PM Reply Like
  • aretailguy
    , contributor
    Comments (1914) | Send Message
     
    rvshaw, not only is $PSEC a great buy right now, it goes ex-divy tomorrow. This is a great short-term gift!!! Buy, buy, buy!!!
    25 Feb 2014, 01:20 PM Reply Like
  • rvshaw
    , contributor
    Comments (117) | Send Message
     
    Yup, I'm waiting to buy at $10.90 tomorrow.
    25 Feb 2014, 01:27 PM Reply Like
  • rlp2451
    , contributor
    Comments (9403) | Send Message
     
    If Congress would get off it's ... and get the reporting requirements changed (as has been requested by the BDC community), this issue would go away.
    25 Feb 2014, 12:41 PM Reply Like
  • tom field
    , contributor
    Comments (72) | Send Message
     
    I don't care whether they're listed in indices, only the bottom line. Being in an index says nothing about the latter. Good time to buy as the lemmings jump off the cliffs.
    25 Feb 2014, 12:42 PM Reply Like
  • Archman Investor
    , contributor
    Comments (3297) | Send Message
     
    Tom:

     

    Agreed!! Indexes have been created over the years in order to create wealth for the so called advisers of these indexes.

     

    I wish all indexes were eliminated & stocks just traded by themselves, not part of some basket that is constantly manipulated.
    25 Feb 2014, 01:02 PM Reply Like
  • bakermre
    , contributor
    Comments (378) | Send Message
     
    The story of a dis-functional US regulatory regime goes on. Pitiful!!
    25 Feb 2014, 12:56 PM Reply Like
  • Overanalytical
    , contributor
    Comments (1058) | Send Message
     
    Yeah I have to agree. This is the exact definition of "noise". Very weak hands are being shaken today.
    25 Feb 2014, 12:56 PM Reply Like
  • bakermre
    , contributor
    Comments (378) | Send Message
     
    I say let's buy and damn the silly, wrong-way raters of mediocrity!
    25 Feb 2014, 12:58 PM Reply Like
  • Vangaurd
    , contributor
    Comments (73) | Send Message
     
    This is a dividend growth play, the company always list the next three months so not only do we get sustained dividends monthly, it gives perdictability as well. The company has been performing well in a low rate environment, once rates go up, so will the stock. Stocks get listed and delisted regularly, not a big deal.
    25 Feb 2014, 01:08 PM Reply Like
  • Vangaurd
    , contributor
    Comments (73) | Send Message
     
    WOW,

     

    So I love people that over react, I actuall owned 8X8 as well, the company replacing, sold out on the almost 9% uptick today, which will fall back once the shuffle is over and added to my PSEC position. This stock will break out when IRs rise. Also I would like to thank them for waiting until the day before the ex-div date to release so I get more shares.
    25 Feb 2014, 01:20 PM Reply Like
  • Babysteps*
    , contributor
    Comments (54) | Send Message
     
    Seems like good news to me. Today's price drop was not company specific. I
    could care less if my favorite BDC is in any index. Going long PSEC.
    25 Feb 2014, 01:28 PM Reply Like
  • rollnon
    , contributor
    Comments (4) | Send Message
     
    It would appear to me that the downward pressure on all BDC stocks represent a buying opportunity. This move does not affect the yield on any of them. The fact that it happened to be announced on the day that AINV issued the news that they are offering 12 Million shares leaves me wondering when and how the companies were notified regarding the move by S&P?
    25 Feb 2014, 01:28 PM Reply Like
  • Peter Runton
    , contributor
    Comments (4) | Send Message
     
    How will this move by the S&P effect earnings and dividends? Probably not at all so what is the problem?
    25 Feb 2014, 01:28 PM Reply Like
  • just a user
    , contributor
    Comments (72) | Send Message
     
    argh, i have no spare cash for a quick purchase. wah !!! :(
    25 Feb 2014, 01:42 PM Reply Like
  • rvshaw
    , contributor
    Comments (117) | Send Message
     
    What a great opportunity to add this to my IRA
    25 Feb 2014, 01:43 PM Reply Like
  • sidneyj
    , contributor
    Comments (4) | Send Message
     
    I have over 10,000 shares of PSEC and is has been my best stock short term as well as long term. I will get as much as I can tomorrow after ex-div. Thanks S&P. BTW I think S&P stands for stupid people, lol.
    25 Feb 2014, 02:32 PM Reply Like
  • stock_research59
    , contributor
    Comments (8) | Send Message
     
    Now that's not nice.
    26 Feb 2014, 01:00 AM Reply Like
  • Lucierja
    , contributor
    Comments (191) | Send Message
     
    A $3.4B removed from a small cap index and a $1.9B removed from a mid cap index. It did not change prices enough to create any obvious buys, but now I wonder if my small cap ETF really has small cap companies in it. It is a stretch to include PSEC even in a mid cap index. Without BDCs the indexes should inflate a bit since removing high dividend payers will leave behind a higher proportion of growth stocks. Might help the index look better, but won't help its yield any.
    25 Feb 2014, 03:07 PM Reply Like
  • berloe
    , contributor
    Comments (2143) | Send Message
     
    Wait! Doesn't removing a name from an index mean the index will be sellers of the name?
    25 Feb 2014, 03:17 PM Reply Like
  • smurf
    , contributor
    Comments (6048) | Send Message
     
    What does this removal mean in practical terms?
    25 Feb 2014, 04:20 PM Reply Like
  • rlp2451
    , contributor
    Comments (9403) | Send Message
     
    In the short term, any funds that mirror those indices will be forced to sell any BDCs they have in their portfolio, which would depress the share price due to the amount (increased availability) of shares. This overhang may take a while to get dispersed. In the intermediate term, those markets (ETFs that were buying the shares) no longer exists, which will also keep downward pressure on prices.

     

    In the long run, no effect at all as the market absorbs the overhang.
    25 Feb 2014, 04:39 PM Reply Like
  • Ocean Man
    , contributor
    Comments (645) | Send Message
     
    I will absorb some of that overhang tomorrow.
    25 Feb 2014, 10:12 PM Reply Like
  • smurf
    , contributor
    Comments (6048) | Send Message
     
    rip,

     

    Thanks for the explanation, which is logical and why I probably didn't figure it out myself. Duh.
    26 Feb 2014, 11:07 AM Reply Like
  • rvshaw
    , contributor
    Comments (117) | Send Message
     
    I did!
    26 Feb 2014, 11:14 AM Reply Like
  • sederrj
    , contributor
    Comments (132) | Send Message
     
    This is the same S&P that rated all those sub-prime mortgage derivatives AAA, right? LOL Looks like they don't want to do ANYTHING questionable.
    25 Feb 2014, 04:24 PM Reply Like
  • critterlitter
    , contributor
    Comments (419) | Send Message
     
    Does PSEC use the ex-div date (or the day prior to the ex-div date) to determine the price of the stock for reinvestment of the dividends?

     

    If it's not either of these dates, then what is the actual day used to determine that share price for reinvesting of the dividend payment?
    25 Feb 2014, 05:13 PM Reply Like
  • AdamDivy
    , contributor
    Comments (412) | Send Message
     
    Most brokers are different. I know ShareBuilder gives me the price at closing of the day before the pay date.
    25 Feb 2014, 05:20 PM Reply Like
  • rlp2451
    , contributor
    Comments (9403) | Send Message
     
    From PSEC prospectus:

     

    The number of shares to be issued to a stockholder is determined by
    dividing the total dollar amount of the dividend payable to such stockholder by the market price per share of our common stock at the close of regular trading on The NASDAQ Global Market on the valuation date for such dividend.

     

    If we use newly-issued shares to implement the plan, the valuation date will not be earlier than the last day that stockholders have the right to elect to receive cash in lieu of shares. Market price per share on that date will be the closing price for such shares on The NASDAQ Global Market.

     

    Some brokers override this process, however. It's best to check with whomever holds your shares to find out how they handle it.
    25 Feb 2014, 05:40 PM Reply Like
  • pennyone122000@yahoo.com
    , contributor
    Comments (44) | Send Message
     
    Most of you do not care if their BDC is on an index.Your missing the point before March some companies will have to dump shares of stock they own.So more downward pressure yet to come.Not being in a index means less investment money for the BDC's
    25 Feb 2014, 07:05 PM Reply Like
  • AllStreets
    , contributor
    Comments (1457) | Send Message
     
    The surprise index exclusion, the secondary offering of AINV, along with other types of potentially unpleasant events, typify why I hold all high yield dividend securities with strong hedges (mREITs, BDCs, royalty trusts, MLPs). Luckily, yesterday I went net short with my hedge on PSEC based on my daily oscillator being overbought and the strong price resistance at 11.40, and also over-hedged on FSC recently. Long PSEC and FSC with hedges.
    25 Feb 2014, 07:14 PM Reply Like
  • Rick Keane
    , contributor
    Comments (2) | Send Message
     
    I agree with the "buying opportunity" theme. But, we should also note that if the reduction of valuation goes too far, or lasts too long, this reduces the BDCs ability to raise capital through sale of its shares. That could cause added reliance on borrowing for new investments. Perhaps not bad at today's rates, but...
    I don't recall any warning that S&P was evaluating this. Why the surprise move S&P? Seems unfair to investors.
    25 Feb 2014, 07:53 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11080) | Send Message
     
    Looks like a great time to add to (ACAS)!
    25 Feb 2014, 07:57 PM Reply Like
  • 2243np
    , contributor
    Comments (18) | Send Message
     
    main issue is what the russel 2000 will do over 30 bdc stocks in russel only 2 in s and p elimination date is end of june if they enact change should produce some attractive prices for stocks in the index last week in june
    25 Feb 2014, 08:32 PM Reply Like
  • Uain53
    , contributor
    Comments (1808) | Send Message
     
    I can't shake the feeling that this is just some short term scam to depress prices for the big boysto buy in. Then in the next couple quarters, new indices of some sort for institutions will arrive and the stocks will rise.

     

    I'll just keep re-investing dividends toward that day.

     

    picked up some (PSEC) today at $11.00
    25 Feb 2014, 11:29 PM Reply Like
  • smurf
    , contributor
    Comments (6048) | Send Message
     
    Scam?!? On Wall St.?!? Perish the thought. Hah.
    26 Feb 2014, 11:08 AM Reply Like
  • AZKID44
    , contributor
    Comments (85) | Send Message
     
    As has been noted, today's price decline is all due to PSEC's elimination from the S&P 600 small cap index , not related at all to the company's fundamentals. Added to my position today @ $11.05 and will I also get the current dividend :) May add more to my position tomorrow (Weds) if it gets below $10.90. All in all a good day for long-term PSEC investors .............
    26 Feb 2014, 12:43 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs