NEW YORK, Sept 25 Shares in RadioShack, the
consumer electronics chain, fell sharply on Tuesday after the
company was bumped off the S&P MidCap 400 index because its
market capitalization was too small.
RadioShack shares dropped 16.3 percent to $2.56. Its
exclusion from the index comes as questions are raised about its
strategic directions and its business model as consumer
electronics retailing moves online. In July, the company posted
a surprise second quarter loss that sent the shares down 30
percent to a record low.
The U.S. consumer electronics chain was dropped from the S&P
500 index in June 2011. Shares of the company have plunged 86
percent since the beginning of 2011.
Certain funds track the composition of indexes like the S&P
MidCap 400. Once a stock is removed from the index they have to
sell it, putting pressure on the price. RadioShack's market cap
was $254.57 million as of Tuesday's close. S&P says companies
need to have a market cap in the range of $1 bln to $4.4 bln to
be included in the index.
In the broader market, the S&P 500 suffered its worst day
since June on Tuesday, pulled lower by Caterpillar Inc
after it cut its profit outlook, the latest high-profile company
to warn about profit growth.
The S&P MidCap 400 index fell 1.6 percent while the
S&P SmallCap 600 index lost 1.5 percent. In comparison,
the benchmark S&P 500 dropped 1.1 percent.
Despite the selloff on Tuesday, analysts at Goldman Sachs
believe improving economic data ahead will likely sustain the
move higher in equity markets this year.
"A shift from risk reduction to improving growth prospects
could propel markets even higher, should the cycle more visibly
improve from here," said Goldman Sachs analysts in a research
In other company news, Tesla Motors Inc fell 9.8
percent to $27.66. The electric car maker cut its forecast for
2012 revenue, citing a slower-than-expected rollout of its Model
Forward Air Corp fell 11.4 percent to $30.84. At
least two brokerages cut their price targets on Forward Air's
shares after the company lowered its third-quarter profit
forecast citing weaker-than-expected airport-to-airport cargo