Embattled firms Provident Financial and Carillion face embarrassing demotions from important stock market indices after massive share price crashes have seen their market capitalisations plummet.
FTSE Russell, which runs the iconic indices, reviews the constituents once a quarter, with firms facing demotion if their market capitalisation falls too far. The latest results will be announced on Wednesday, based on Tuesday's closing prices.
Sub-prime lender Provident’s relegation was all but assured last week by catastrophic results, which saw almost £1.4bn wiped off the firm’s market capitalisation over five days. Shares fell by 66 per cent last Tuesday in one of the FTSE's biggest one-day falls ever.
A demotion from the FTSE 100 would cap a fortnight in which Provident’s chief executive resigned, it announced regulators are investigating parts of its business, and it revealed an enormous profit warning.
United Arab Emirates-based health care provider NMC Health looks likely to make the step up into London’s main index, barring major moves in share prices over the course of Tuesday.
Meanwhile construction firm Carillion will likely fall out of the FTSE 250 after its own spectacular July profit warning. At the end of last week the builder was worth only around a quarter of its value at the start of July after it stopped its dividend and announced it was facing difficulties on borrowing limits.
However, Royal Mail may stay in the blue-chip index, despite falling losing more than £1.2bn in value over the course of the last year amid pension deficit woes. It has been a member of the FTSE 100 since being privatised in 2013.
Dixons Carphone will also escape a further movement, despite a torrid year which has seen its value more than half. Shares feel steeply last week following the revelation that profits will be as much as 30 per cent below earlier analyst predictions.
The shock profit warning has spurred investors in the electronics retailer to push for the board to speed up its search for a new boss to replace under-pressure chief executive Seb James, according to Sky News. James has run Dixons since 2012, before it merged with Carphone Warehouse in 2014.
Firms drop out of the FTSE 100 if they are below 110th in the UK ranking by market capitalisation at the time of the review, which will be calculated using share prices at the close of business on Tuesday, although not announced until Wednesday. The changes will then come into force on 18 September.
Carillion is also likely be joined by van hire specialist Northgate and Petra Diamonds in being demoted from the FTSE 250.
Based on share prices at the end of last week, they would be replaced in the mid-cap index by online gambling firm 888 Holdings, recently listed City software darling Alfa Financial and the Sequoia Economic Infrastructure Income Fund.
Some funds tracking the indices are obliged to buy shares in new entrants and sell those being relegated, but the changes to the indices do not usually have a major effect on share prices. However, they often serve as a symbol of the changing fortunes of companies.
At the last reshuffle at the end of May shopping mall owner Intu Properties dropped out of the top league, along with Jordanian pharma firm Hikma. They were replaced by security outsourcer G4S and property developer Segro.