S&P 500 Welcomes Back General Motors and AIG, Says Goodbye to H.J. Heinz and Baker Hughes

Michael Teague  |

On Monday, the Standard & Poor’s 500 index released a statement that ketchup-maker H.J. Heinz Co. (HNZ), who will be dropped from the list after the close of trading on June 6th as a result of that company’s buyout and privatization at the hands of Warren Buffet’s Berkshire Hathaway (BRK) and the Brazilian hedge fund 3G Capital, will be replaced by General Motors Co. (GM).

General Motors was dropped from the list in June of 2009 subsequent to filing for bankruptcy and accepting a $50 billion bailout from the government, which put the world’s largest auto-maker in receivership to the Treasury.

GM became public again the next year, when it returned to the New York Stock Exchange in 2010 as the Treasury was eager to begin unloading its then-61 percent stake of the company, which has been whittled down to some 16 percent over the last two years.

GM, along with American International Group (AIG), will also join the S&P 100 index on Thursday.  AIG is another company that was bailed out by the government after the financial crisis wreaked havoc in markets, and will replace oil drilling equipment manufacturer Baker Hughes (BHI), who is being removed from the list due to its market cap having sagged beneath the $21 billion threshold.

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The index has been modified on four other occasions in 2013 prior to the change that will take place this coming Thursday. In February, discount retailer Big Lots Inc. (BIG) was removed from the list because its market cap fell below the necessary threshold, making way for the clothing maker Philips-Van Heusen Group. In March, a majority of the telecom company MetroPCS (PCS) was acquired by T-Mobile, and was replaced by the pharmaceutical company Regeneron (REGN).

In May, Coventry Health Care (CVH) was removed from the list after it was acquired by Aetna (AET), and was replaced by the REIT Macerich (MAC). Most recently, in May, Dean Foods (DF) was switched over to the S&P 400 MidCap 400 index, leaving some space for Railroad Kansas City Southern (KSU).

The S&P 500 index was established in 1957 by the financial services firm Standard & Poor’s, and is generally to be the most broadly representative of U.S. Markets. The list is comprised of 500 large-cap, publicly traded companies. The companies are chosen by the S&P Index Committee that is made up of analysts and economists who are S&P employees, and whose decisions are guided by standards rather than rules.

A market-weighted index, S&P 500 companies are ordered according to their size rather than share price. Thus, a company’s performance affects the index on any given day based on the percentage its market cap represents of the list’s total market cap.

The S&P 500 is also a price return index rather than a total return index, meaning that a company’s dividends are not calculated as returns.

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