Markets

Stock market dinosaur Exxon Mobil flies out of the Dow Jones

E.t is a chain reaction whose symbolic power can hardly be surpassed: The increasingly highly valued technology company Apple is splitting up its coveted stocks in order to become more affordable for small investors.

This step indirectly means that the oil company Exxon Mobil has to leave the top league of the stock exchange, which observers see as evidence of the loss of importance of companies from the classic industrial age compared to the emerging digital economy – at least on the stock exchange. This is Apple’s fifth stock split, which is the reason for the historic change of the guard in the Dow Jones Industrial stock market index.

The technology company from Silicon Valley went public in 1980, so it’s almost a veteran of the stock market, but Exxon Mobil’s history goes back to the 19th century and thus even further. Back then, the Rockefeller dynasty laid the foundation not only for the company, but also for the oil age in the western industrialized nations. Fossil energies are not deregistered from the capital market, as the huge IPO of the state-owned Arab oil company Saudi Aramco showed last year. But Exxon Mobil’s share price has not yet recovered from the slump in the Corona crisis.

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To the detailed view

Apple, on the other hand, is rushing from one stock market record to the next despite – or perhaps because of – the pandemic. Any investor who held Apple shares on Monday will receive three more shares for each share after Friday close of trading. This split will not change the market value of the company or the value of the investors’ blocks of shares.

However, this has consequences for Apple’s weight in the Dow Jones Industrial. The 124-year-old index weights stocks according to their price and not according to their market value like modern indices. Therefore the weight of Apple and with it that of the entire technology industry in the Dow Jones is falling. To compensate, another representative of the tech industry is supposed to move up to reinforce it.

Old economy on the decline

As the index provider S&P announced on Tuesday, it is the company software manufacturer Salesforce. Its share price development has far eclipsed that of Exxon Mobil.

When the Dow is calculated for the first time with a new line-up on Monday, two other representatives of the “old economy” will leave the index: The biotech company Amgen and the conglomerate Honeywell will then move up for the pharmaceutical giant Pfizer and the defense company Raytheon Technologies. This will also increase the weight of the “New Economy” in the index.

Alongside the S&P 500 and the Nasdaq technology exchange, the Dow Jones Industrial share index is the most important flagship of the globally leading American share market. Since the Dow, unlike the broader S&P 500, only shows 30 companies, its role as representative of the American economy and stock market is controversial.

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