I’ve been thinking about this a lot, and in my opinion, reconstitution is convenient cover for large trades to take place and not raise suspicions that something of interest is happening with a particular stock. Reconstitution of the Russell 2000 does not compel an individual stock to be bought or sold, and yet this is often proffered by our iHub experts to be the the case. Reconstitution refers to the periodic process of rebalancing the components of an index to ensure that it accurately represents the desired criteria. In the case of the Russell 2000, the index is reconstituted annually to include the 2,000 small-cap stocks that meet the specified criteria.
When the reconstitution takes place, stocks may be added or removed from the index based on their market capitalization and other eligibility criteria. However, the decision to buy or sell stocks during this process is typically made by investors and portfolio managers who seek to align their holdings with the updated composition of the index. It is not a requirement for the individual stocks themselves to be bought or sold.
The reconstitution of an index can have an impact on the prices and trading volumes of the stocks involved, as market participants adjust their portfolios accordingly. However, these actions are driven by individual investment strategies and decisions, rather than a direct obligation or requirement imposed on the stocks themselves.
So the question remains, who is buying a selling these large share blocks? Also who are the institutional investors and portfolio managers with fiduciary responsibilities that have so much invested in COOP? Something does not add up.
All in my opinion.
~jb
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