A surge in the value of online supermarket Ocado in recent weeks means it is poised to become one of Britain’s top 100 stock market-listed companies along with gambling conglomerate GVC – the owner of Ladbrokes Coral – following the quarterly reshuffle of the FTSE 100 index.
But the threat of expulsion from the business elite hanging over Marks & Spencer appeared to have receded as closing share prices on Tuesday showed government outsourcing contractor G4S and healthcare firm Mediclinic were set to drop out of the FTSE 100.
Laith Khalaf, a senior analyst at stockbroker Hargreaves Lansdown, said: “Marks & Spencer looks like it’s avoided relegation from the FTSE 100 by the skin of its teeth.”
The London Stock Exchange oversees a reshuffle of the FTSE 100 index every three months, taking into account the rising fortunes of some companies and the deterioration in others.
Khalaf said that without a strong turnaround, M&S could still be heading out of the index later in the year.
“This is a stay of execution rather than a full pardon. M&S boss Steve Rowe is promising transformation, and has been candid in admitting it’s a lengthy road ahead. However the pace of disruptive technological change means making M&S special again is a moving target, and management are taking aim from a long way out.”
Ocado is set to enter the FTSE 100 for the first time after a string of deals with overseas supermarket chains to use its software.
The company has signed deals in France, Sweden, Canada and the US to license its online delivery technology.
Khalaf said: “Ocado has for some time been a popular stock for hedge funds to bet against, but now just 5% of the company’s shares are in the hands of the short sellers compared to 13.5% in January. There’s still the question of turning potential into profits, but the cookie jar lid has now definitely been prised open.”
GVC has followed Ocado into the FTSE 100 after sweeping up online operators Bwin in 2016 and Sportingbet in 2013.
Retailers Carpetright, Mothercare and Moss Bros all face ejection from the FTSE All Share Index, said Khalaf, after the businesses announced dramatic fundraising measures that diluted their share equity to a fraction of its previous value.
“These companies are struggling to make ends meet, so losing their place in the index is probably a peripheral concern, though it still has negative implications for the liquidity in these stocks. The triple relegation is an indication of just how tough things are on the high street,” he said.
G4S, which faces claims that it overcharged the Ministry of Justice for electronic tagging and botched security arrangements at the London Olympics, has seen its share price slide in recent months while Mediclinic’s share price declined sharply following a poor set of results last week.
