DThis is what we call collateral damage: the asset manager Julius Baer loses his place in the Swiss Market Index (SMI), the main index of the Swiss stock exchange. "Guilt" is supported by Novartis. The Basel pharmaceutical company is divesting its Alcon subsidiary and bringing them separately to the stock market. As of April 9, the actions of the ophthalmologist will be listed in Zurich.
Alcon is not a small stall, but a corporation with 20,000 employees and more than $ 7 billion in sales. Analysts have estimated the company's market value at $ 20-22 billion. Therefore, it is clear that Alcon will be immediately included in SMI, which lists the 20 most important companies in Switzerland. As announced by the Swiss Stock Exchange, Julius Baer leaves the SMI with effect from April 10. Zürcher Bank is now included in the SMIM index, which comprises 30 titles. To do this, the actions of the Aryzta bakery group must exit the SMIM.
These changes may influence the development of stock prices of the undertakings concerned. There are many investors and funds that buy all the shares represented at a certain index. As soon as a company leaves this index, the investors also participate in the corresponding actions.
And they are investing in a company that is re-entering the index. Also for the Novartis stock market price, all stock will have consequences. The company divides 100% of Alcon, with each shareholder receiving one share of Alcon for five shares of Novartis. From a purely mathematical standpoint, the Novartis stock market value on the April 9th reporting date would have to be reduced by the exact value of the divided Alcon. As Alcon's market price develops, it depends on whether the new shareholders, ie the former owners of Novartis (for the time being) hold or sell their allocated shares.
Large financial investors play an important role
Above all, the behavior of the largest financial investors, who currently hold Novartis shares, plays a role here. If you wish to invest exclusively in pharmaceutical companies according to the mandate of your funders and the structure of your fund, you are likely to launch Alcon's shares in the market. Because the company is not a pharmaceutical title, but a specialist in medical technology. Alcon manufactures medical lenses and surgical supplies required for eye surgery. In addition, it has contact lenses and cleaning products for everyone present.
From the point of view of Novartis shareholders, the Alcon IPO is also interesting because, for the first time, a market value for the former subsidiary is visible. If this unexpectedly falls below $ 17 billion, Novartis will be forced to give up. Because this value is Alcon in the group books. This should correspond to a market price of 30 francs per share. Analysts estimate that Alcon's 490 million shares will start next Tuesday at rates ranging from 43 to 47 francs.
Value is not so easy to estimate because you can not target comparable competitors. Alcon is the clear leader in the field of eye surgery in the world. By far the biggest supplier, none of the (even smaller) competitors dared to come up with a proposal when the Novartis leadership announced it was leaving Alcon. The company is a legacy of olden times when Novartis saw its salvation in a diversification strategy.
In short, the Swiss have already sold $ 50 billion to Alcon at the table. But the expectations associated with this moon price have never been realized. After a series of operational and strategic errors, the company had to be restructured and restructured. The fruits of this reconstruction are now visible; Sales and increase in operating revenue. The end result, however, was a loss of $ 227 million in 2018. Although Alcon is in fact an American company, it will be based in Switzerland for tax purposes.