Brookfield Stock Drops 5.1% After S&P 500 Rejection

Brookfield Asset Management Inc. (BAM.US) has seen its stock price decline by 5.1% following the latest quarterly rebalancing by S&P Dow Jones Indices, which did not approve the change of the company's registration from Canada to the United States. This adjustment was necessary for Brookfield to be included in the S&P 500 index, a move that had been anticipated by investors. Consequently, the company's market capitalization has decreased by $40 billion as investors unwound their positions based on the expectation of Brookfield's inclusion in the S&P 500.

Analysts from the Bank of Nova Scotia (BNS) have identified this downturn as a strategic buying opportunity. According to Jean-Michel Gauthier, an analyst at BNS, the delay in Brookfield's inclusion in the S&P 500 index creates a tactical window for investors to buy the stock. Gauthier believes that S&P Dow Jones Indices is likely to approve Brookfield's change of registration in the future, potentially leading to the company's inclusion in the S&P 500 index by 2026 or later. This perspective is based on Brookfield's relocation of its headquarters from Toronto, Canada, to New York in the previous year.

Prior to the rebalancing announcement by S&P Dow Jones Indices, Brookfield's stock price had risen for four consecutive trading days. Analysts had anticipated that if Brookfield were included in the S&P 500 index, index-tracking funds would be compelled to purchase approximately 6.3 million shares of the company. This expected demand had driven the stock price higher in the lead-up to the rebalancing decision.

Gauthier also addressed concerns that the change in registration might unsettle some Canadian shareholders. He noted that these shareholders are unlikely to object to the move, as Brookfield will not be exiting the Toronto Stock Exchange Composite Index or the Toronto Stock Exchange 60 Index. Gauthier suggested that as the next rebalancing in September approaches, this debate may resurface, potentially influencing market sentiment and stock performance.