Ocado Group (LON: OCDO) (OTCPK: OCDGF) could have considerably further to fall as there's a little technical happening showing up over the horizon. As we know, this idea that Ocado was going to be the go to technological shopping group plan has turned out to be not quite so skillfully executed. This has led to the shares falling. Losses continue, there seems to be no grand event just coming up that is going to stop them and, well, what's the story here? Where's that morning glory? So, obviously enough, a falling share price.
But there's a little wrinkle just coming up. Obviously, a falling share price means a lower market capitalisation. The two are pretty much the same thing. But we also have varied indices in London. There's the FTSE100, the FTSE250, even the FTSE350 (which is the first two put together). Well, that's fine. But those indices are done by market capitalisation (with a bit of weighting and so on). Which makes this one of those things that could further weigh on the Ocado share price: “Ocado is facing relegation from the FTSE 100 index as its share prices dropped even further. The online-only grocer's market value has more than halved in the past year and is expected to fall into the FTSE 250, data has revealed.”
Ocado Group share price from London Stock ExchangeNow, being in one index or the other doesn't, directly, make all that much difference. But indirectly it makes a huge difference. For by far the largest weight of money on the London market is in FTSE100 index funds. Index funds, by definition, own the index components. A share, a stock, falls out of the FTSE100 then that's an entire series of funds lining up to sell. And they do all sell after the change in the index. Because if they try to do it before then they're no longer tracking the index.
Yes, sure, there are those FTSE350 funds which will still keep holding but they're tiny in comparison. So too the FTSE250 funds - they exist but at nothing like the scale of the FTSE100 ones.
Of course, this is not catastrophic, falling out of the FTSE100 does not make a company go bust or anything. But it does depress the share price further - further, because the reason for dropping out in the first place is a falling share price of course.
There's good reason Ocado has been the most shorted stock in London. Jointly still is in fact.
