The S&P Dow Jones Indices is reorganizing the way it classifies companies in its Global Industry Classification Standard (GICS). This reshuffling will impact 23 S&P 500 companies, which are altogether worth about $2.7 trillion. Those impacted include Facebook, Twitter, and Google-parent Alphabet. The changes will happen after the market closes on Friday, September 28.
In a nutshell, Twitter, Facebook, and Alphabet will leave their existing S&P Tech category and join the S&P Telecom group, which will be renamed “Communications Services.” Companies that were in the old S&P Telecom group that are now part of Communications Services include AT&T, Verizon, and CenturyLink. This research paper offers a more detailed explanation.
One reason for the reconfiguration is that the current Telecom category only has three stocks: AT&T, Verizon, and CenturyLink. Consolidation in the telecom area has led to this situation resulting in the group being wildly swayed if the stock price of just one company rises or falls.
The changes are intended to reflect how the tech, media, and telecom industries now have many services that are overlapping, according to the Wall Street Journal. This overhaul also will likely impact how mutual fund managers pick their stocks. And experts say that by removing Alphabet and Facebook from the technology index, investors will likely pay more attention to some of the smaller tech companies that remain on the list, such as Cisco, Intel, Microsoft, and Oracle.