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Free-float
Free-float of CAC40 components stocks will be calculated once a year on the basis of available information. Calculations will be rounded up to the nearest full multiple of 5%.
Annual reviews of float calculations will take place once a year at the end of June. Revised figures will be published on the first business day of the following month and take effect from the first business day of September.
The review will concern both float and the number of shares representing the capital stock of the companies concerned.
Exceptional revisions may be made if the rounded percentage of float rises or falls by 5%. For this purpose, events of the following kind will be considered:
- transactions leading to the issue of new shares or the cancellation of existing shares, equity swaps and mergers;
- a rise in a shareholder's interest to 20% or above.
Capping factors
Weighting of single stocks in the CAC 40 will be limited to 15% of the total free-float capitalization of the index, this being to avoid excessive weighting on any single stock and ensure the sample remains representative. If the weight of a stock exceeds this limit, it will be brought down to 15% by application of a capping factor.
Capping factors will be reviewed annually. The revised calculation will be published at the same time as revised float calculation on the first business day of July, and will be calculated on the basis of information available on the last business day of June. Revisions will take effect from the first business day in September.
The Index Steering Committee may also make exceptional revisions of capping factors in the event of significant changes in the equity of the companies to which they apply.
Such exceptional revisions will be announced in an official Notice published by Euronext Paris and will take effect five business days after publication.
In connection with the new methodology for the CAC40 and with a view to preserving the consistency between the CAC40 and other indices, the Steering Committee has also adopted changes to rules concerning parent companies and subsidiaries. From December 1, 2003:
- the parent company - subsidiary rules will no longer apply to subsidiaries in the CAC40, free-float being the only consideration for all component stocks;
- where a parent company and its subsidiary are both CAC40 components, the number of shares used for the subsidiary in the calculation of SBF120 and SBF250 indices will be equal to that for free-float.
Background
From 1 December 2003 on, the CAC40, like other leading indices, will be weighted by free-float capitalization and not by total capitalization, as has hitherto been the case.
This change is to ensure a closer match between the actual position of stocks on the market and the way this is reflected in indices. By the same token, it will limit the volatility that can result from a discrepancy between the weight of a stock in the index and amount of free-float actually available to the market.
As defined by the Euronext Index Steering Committee, free-float is the total share capital issued by the company less treasury stock, shares held directly or indirectly by the founders and/or the State, controlling blocks, shares subject to a shareholders' agreement not entering into any of the former categories, and holdings considered stable.
