Darktrace May Drop Out of FTSE 100, Leaving U.K. With Tech Gap

(Bloomberg) -- Darktrace Plc’s stint as a U.K. blue-chip stock may be short-lived, with the cybersecurity firm set for possible removal from Britain’s FTSE 100 Index after only being promoted to the benchmark last month.

Darktrace was named among potential deletions along with chemicals firm Johnson Matthey Plc by London Stock Exchange Group Plc’s FTSE Russell on Tuesday when it unveiled the indicative results for the FTSE 100’s quarterly review. The final changes will be announced on Dec. 1, using market capitalization of companies at the close of trading the prior day.

The U.K. cybersecurity company has had a rollercoaster year. Shares surged after its IPO in April, which came at an earlier date and lower valuation than initially expected. After being added to the FTSE 250 Index in September, it was promoted to the FTSE 100 a month later after the removal of Wm Morrison Supermarkets Plc following acquisition. 

Recently the stock has been on a downward trend, slumping 47% since broker Peel Hunt in late October questioned the effectiveness of its products and recommended selling the shares. The end of a lockup period also weighed as it allowed insiders to sell.

The loss of Darktrace from the FTSE 100 would further dent the U.K.’s technology exposure following the recent deletion of Just Eat Takeaway.com, which became ineligible for the gauge due to a change in its assigned nationality. The FTSE 100’s low technology weighting -- which accounts for just 1.2% of the index according to Bloomberg data -- is now set to drop even further.

“The FTSE 100 has struggled historically with retaining and attracting big tech names to list,” John Moore, head of trading at Berkeley Capital Wealth Management, said by phone. “People seek alpha via these tech companies, so I think it just causes the FTSE to lag a bit compared to its rivals.”

Index members benefit as so-called tracker funds hike their weightings in the stocks, while demotion may lead to selling as funds look to adjust in line with the benchmark’s allocations. According to FTSE Russell’s guidelines, any stock that falls to 111th position or below is automatically deleted from the index, while any that rank 90th or above join.

Among other changes, FTSE 250 members including industrial products supplier Electrocomponents Plc and veterinary medicines maker Dechra Pharmaceuticals Plc are set to be promoted to the FTSE 100, according to the statement.

The lag between the indicative index changes and the actual announcement means that the stocks set to enter and drop out may change. The final changes become effective on Dec. 20.

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