Key Points
This will occur just before the start of trading next week.
It's displacing an industrial company that is being acquired.
Cybersecurity company Tenable (NASDAQ: TENB) was looking like a very secure investment on Thursday. After the stock was announced as a new component of a high-profile index on Wednesday, following market close, its share price zoomed nearly 12% higher across Thursday's trading session.
Graduation day is coming
That equity gauge is the S&P SmallCap 600 index. Its owner, S&P Dow Jones Indices announced that Tenable is to become a part of it prior to the start of trading this coming Monday, Aug. 31.
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Tenable is replacing specialty industrial company Leggett & Platt. That company is being acquired by Somnigroup International and will no longer be an independent, publicly traded business.
S&P Dow Jones Indices manages some of the most closely followed equity indexes in the world. The most critical of these is the bellwether S&P 500 index.
The index effect is real
It's important to note that, in terms of operations and fundamentals, inclusion on an equity index makes little to no difference to the affected company. That said, such an ascension instantly flags it as a target for the scores of index funds that are strictly limited to investing in index-component titles.
Given that, I wouldn't snap up Tenable shares purely on the basis of its inclusion in the S&P SmallCap 600 index. This is, however, a positive development that will increase the company's visibility.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.