Royal Mail Group (RMG) is confident of promotion to the FTSE 100 (UKX) on Wednesday in a reshuffle which looks set to be dominated by recently-listed companies.
Also awaiting promotion following successful initial public offerings (IPOs) are Merlin Entertainments (MERL), which owns Legoland and the former Tussauds group, and estate agent Foxtons (FOXT).
Shares in Merlin only began unconditional trading on 13 November, but they are already up 11% on their 315p float price and the company could join Royal Mail in the FTSE 100. Foxtons, which listed in September, is likely to join the FTSE 250 after the booming housing market boosted its value to £829 million from £649 million at its market debut.
Meanwhile, Royal Mail shares were trading at around 600p on Tuesday, 80% above their list price of 330p. This puts them safely in the promotion zone, as any company to join the 90 largest in the London Stock Exchange by market capitalisation is automatically included in the FTSE 100 list.
Royal Mail was equivalent to the 75th biggest by the end of its first day of trading, and stood at 64th at close of trading on Friday, when its shares were trading at 594p.
Losers
The company most likely to be knocked out of the FTSE 100 to make room for Royal Mail is miner Vedanta Resources (VED). If this happens, Vedanta will be the third miner to be demoted from the blue-chip index in 2013, following Kazakhmys (KAZ) in March and Eurasian Natural Resources Corporation (ENRC) in September.
The companies tipped to leave the FTSE 250 include defence firm Chemring (CHG), carpet retailer Carpetright (CPR), lighting technology provider Dialight (DIA), silver and gold miner Hochschild Mining (HOC), aviation and distribution company Menzies (MNZS), and baker Greggs (GRG).
These will make way for companies including energy investor Riverstone Energy (RSE), which also completed an IPO in 2013, telecommunications company Carphone Warehouse (CPW), sports fashion retailer JD Sports Fashion (JD.), and building materials firm Grafton Group (GFTU).
The final list will be decided by the FTSE Europe, Middle East and Africa Committee on Wednesday, based on Tuesday’s closing prices. The reshuffle will be announced after market close on Wednesday and will take effect after market close on December 20.
Investor view
Users on the Interactive Investor Royal Mail discussion board were pleased but unsurprised by the certainty of the company’s promotion.
‘Big Bad Business‘ said the update was “not exactly news”, and “any uplift, I suspect, has already been factored into the price”.
However, ‘Tony Flair‘ was more confident of some share price movement, commenting: “I suspect it’ll go up a little, simply because tracker funds will be required to buy shares once it’s in the FTSE 100.
“That will cause a small peak in demand, which should raise the price slightly. I don’t expect any massive leap, however.”