Impact of a company bust/takeover on ISEQ linked fund.

[CTRL]

Hi All,

Could anyone give a description (without getting into questions of the likely magnitude of loss or gain) of the effect that a listed company going bust or being bought/taken over by another non-Irish company would have on an ISEQ linked fund such as the Quinn Freeway product and the mechanics of what happens in the index itself in such an event?

 

[Duke of Marmalade]

Fairly simple really. Say the ISEQ is standing at 5,000 and 100 of this is made up of the XYZ share priced at €1 say. Then if XYZ goes bust, it is worth 0 and the index falls to 4,900 and XYZ never again contributes to the index. If XYZ is rescued at 50p, it is still removed from the index but the index is only reduced by 50 to 4,950.

For indices like the FTSE 100 there is a process for bringing in the next biggest stock, but that of itself does not immediately affect the level of the index.