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· Posted on
February 21, 2024

Hermés will list on the Euro Stoxx 50 and who's even buying these Birkins? Asking for a friend

Hermés are best known for their Birkin - aka the most expensive bag in the world...We're talkin' anywhere between $40k...and $500k.

What's the key learning?

  • Hermés is set to list on the Euro Stoxx 50 - aka the index that represents the 50 largest companies in the eurozone
  • This means their share price will probably jump even further thanks to the index effect
  • A share index covers a group of companies that fit a specific criteria (i.e. the ASX200 is the largest 200 blue-chip companies in Oz)

Background: Hermés is the French luxury goods company that were founded back in 1837. They're best known for their Birkin - aka the most expensive bag in the world...We're talkin' anywhere between $40k...and $500k.

What happened: Despite the hefty price-tag, these babies sell. So it's not surprising the company is worth a huge $280 billion. And this crew had a stellar 2021, with shares rallying 90% so far.

What else: Now, the company is set to list on the Euro Stoxx 50 - aka the index that represents the 50 largest companies in the eurozone. This means their share price will probably jump even further thanks to the index effect.

So what's the key learning?

💡The index effect happens when a company is added (or removed) from a major share index. To recap, a share index covers a group of companies that fit a specific criteria (i.e. the ASX200 is the largest 200 blue-chip companies in Oz...or the S&P500 is the largest 500 companies in the US).

💡Companies are often added or removed from indexes based on their financial circumstances. So, when a company like Hermés is added to a big index, like the Euro Stoxx 50, all of the investment funds that have invested in the Euro Stoxx 50 will have to buy shares of Hermés.

💡And vice versa, they'll have to sell shares in the company if it drops off the index. In this case, Universal Music Group is dropping off in place of Hermés. All of this can either send the share price up (Hermés), or down (Universal Music Group).

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