AMC stock was left out of the Russell 1000 index but GameStop was let in: here’s why

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on Jun 28, 2021
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  • GameStop Corp Inc is set to be included in the FTSE Russell 1000 index.
  • AMC to remain in the Russell 2000 index despite its larger market cap.
  • Expert says GameStop Corp is unlikely to disrupt the Russell 1000 index.

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GameStop Corp Inc (NYSE: GME) is set to be included in the FTSE Russell 1000 index, but AMC Entertainment Holdings Inc (NYSE: AMC) failed to find a spot on it despite the Reddit community-driven trading frenzy that ballooned its market capitalisation by billions of dollars this year.

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So far, both GME and AMC were a constituent of the Russell 2000 index. The FTSE’s annual reconstitution, however, will now promote GME to the index that tracks the top 1000 stocks instead.  

Why wasn’t AMC Entertainment added to the Russell 1000 index

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At roughly $28 billion, AMC Entertainment currently values almost twice as much as GameStop. But it wasn’t included in the Russell 1000 because its shares rallied after May 7th – the deadline for data collection that determines which companies will be up or downgraded in the FTSE’s annual reconstitution. As of May 7th, AMC had a market cap of only $4.3 billion.

According to Jefferies’ Steve DeSanctis, the reconstitution will drop the proportion of profit-generating companies in the Russell 2000 to a record low in over two decades. AMC, which will be the index’s largest constituent, has failed to return to profitability in the past seven quarters.  

GameStop is unlikely to disrupt the Russell 1000 index

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Horizon Investments’ Mike Dickson, on the other hand, highlights that Russell 1000 includes the $2 trillion giants, Apple Inc and Microsoft Corp, along with a list of other mega-cap companies. The addition of GameStop, therefore, won’t have a disruptive effect on the index.  

The talk of reconstitution stirred volatility just before market close on Friday. Small-cap companies like Oasis Petroleum, Arko Corp, and Edgewise Therapeutics were seen under pressure on speculation that these will be demoted from the Russell 2000 index to be a part of the Russell 3000 instead.

GameStop closed about 1.3% down on Friday, while AMC Entertainment tanked about 4.5%. Both stocks remained unbothered in after-hours trading.

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