DocuSign in, United Airlines out of NASDAQ-100 index: What it means when a stock is delisted or relisted

Posted: 16 June 2020 12:23 pm
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What you can expect when stocks are added to or removed from a popular index.

Investors in the NASDAQ-100 Index (NDX) and any ETF that tracks that index, including the popular PowerShares QQQ ETF (QQQ), will own DocuSign (DOCU) stock instead of United Airlines (UAL) stock beginning next week.

The move is an uncommon midyear swap prompted by United Airlines failing to meet the NASDAQ-100 weighting minimum for two consecutive months. Normally the index of the NASDAQ’s most elite nonfinancial stocks rebalances only once every year, in December.

Because many mutual funds, ETFs and institutional investors follow the NASDAQ-100 index, there could be a resulting wave of selling for UAL and subsequent buying for DOCU, though that’s not always the case. Many other factors also influence investors’ decisions to buy and sell stocks.

Note that the changes are only occurring to the NASDAQ’s top 100 index, not the NASDAQ exchange as a whole. Being added to or delisted from the NASDAQ or New York Stock Exchange, like JCPenney (JCP) removal last month, often indicates substantial problems with the stock. In JCP’s case, the company filed for bankruptcy.

Here’s how similar stocks reacted to addition or removal from the NASDAQ-100 earlier this year. Note that movement took place as the broader stock market rebounded from its mid-March low, while the newest addition and removal come at a time when the stock market is correcting down from that significant rebound. Glucose monitoring system maker Dexcom replaced American Airlines on April 20, and video conference platform Zoom replaced global insurance broker Willis Towers Watson on April 30.

Stocks added to the NASDAQ-100 in 2020

Stock Opening price a week before listing Opening price on day of listing Closing price a week after listing
Dexcom (DXCM) $279.04 $322.50 (+15.6%) $332.20 (+19.1%)
Zoom Video Communications (ZM) $154.01 $139.99 (-9.1%) $157.89 (+2.5%)

Stocks removed from the NASDAQ-100 in 2020

Stock Opening price a week before delisting Opening price on day of delisting Closing price a week after delisting
American Airlines (AAL) $12.92 $11.14 (-13.8%) $10.29 (-20.4%)
Willis Towers Watson (WLTW) $184.77 $174.25 (-5.7%) $193.21 (+4.6%)

When the DocuSign–United change will happen

NASDAQ announced on Friday that electronic signing and document management company DocuSign (DOCU) would be included in three indices when trading opens on Monday, June 22: the NASDAQ-100, the NASDAQ-100 Equal Weighted Index (NDXE) and the NASDAQ-100 Technology Sector Index (NDXT).

Also on June 22, United Airlines (UAL) will no longer be part of the NASDAQ-100, the NASDAQ-100 Equal Weighted Index and the NASDAQ-100 Ex-Tech Sector Index (NDXX).

How to buy or sell DOCU or UAL stock

Investors can buy or sell DocuSign or United Airlines stock at any time leading up to or after the index changes. If you already have a funded brokerage account, search for the respective stock or ticker symbol (DOCU or UAL), choose between a market order (at the current price) or a limit order (only at the price you choose or better, though this kind of order may not always be executed) and input your buy or sell order with the number of shares or dollar amount, if fractional shares are allowed. You typically have the opportunity to review your order before placing it.

If you don’t yet have a brokerage account, consider your options for trading platforms before making your first trade.

Photo: Getty Images

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