Shopify Inc. (SHOP) is taking steps that could enable it to join major stock indexes, potentially attracting a significant influx of investor capital into its shares. The Canadian e-commerce company, founded in Ottawa, plans to transfer its US-listed shares from the New York Stock Exchange to the Nasdaq Global Select Market, with the change effective March 31. This transition could open the door for Shopify to be included in the Nasdaq 100 Index, which tracks the 100 largest non-financial companies listed on the Nasdaq
. “Being included in that index would translate to increased purchasing power for a stock,” noted Matthew Maley, Chief Market Strategist at Miller Tabak + Co, highlighting the inflows into funds that track the Nasdaq 100 (^NDX) in recent years. Shopify currently boasts a market capitalization that ranks it among the top 25 Nasdaq-listed companies. Following the announcement of its planned transfer to Nasdaq, the company’s shares have surged 16%, outperforming the broader index. Despite this move, Shopify will maintain its dual listing on the Toronto Stock Exchange.
The primary criteria for inclusion in the Nasdaq 100 are a company’s size and its listing on the exchange, but there remains uncertainty regarding when or if Shopify will be added. Representatives from both Nasdaq and Shopify have refrained from commenting on the potential inclusion. As passive investment funds continue to dominate the market, inclusion in major benchmarks has become increasingly important for companies. Mutual funds and exchange-traded funds (ETFs) must purchase shares of companies that are part of the index to maintain accurate representation of its composition. According to Bloomberg Intelligence, approximately 21% of shares in the average publicly-traded US company are held by passive funds, a figure that has more than tripled since 2013. Funds linked to the Nasdaq 100 alone manage hundreds of billions of dollars. “In many cases, there is some anticipation surrounding the inclusion and the associated benefits for these companies, but for those already well-known, the impact may be less pronounced,” stated Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott.
Additionally, joining an index could lead to a closer correlation between a company’s stock performance and the broader market over time.
