Following a recent indices rebalance, the Australian Agricultural Company Ltd (ASX: AAC) – also known as AACo – will be removed from the ASX200, Australia’s pre-eminent benchmark index, grouping the 200 largest ASX-listed companies.
The cattle producer shed about 20% of its market capitalisation in the last year, significantly underperforming the market, although not as much as the other two companies poised to leave the ASX200 following the rebalance: Myer Holdings Ltd (ASX: MYR) and HT&E Ltd (ASX: HT1).
The trouble started mid-November, when AACo released a disappointing half-year result, reflecting challenges in the transition from a simple livestock company to a branded beef business.
Stocks tend to come under selling pressure when removed from indices, because many funds target companies listed in the indices and dump those excluded. So why was AACo such a big gainer today, up 8% to $1.26?
There has long been speculation about a possible buyout and privatisation of the company at the hands of its main shareholder, British billionaire Joe Lewis, and his investment company Tavistock Group. Following the recent price tumbles, the impression is that Tavistock may soon take control of AACo.
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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.