👉 Background: Porsche is the German luxury carmaker named after the founder Ferdinand A Porsche in 1930. It’s famous for the 911, the Cayenne and for its galloping horse mascot. By August 2012, Volkswagen Group owned 100% of Porsche until 2022, when Porsche listed on the Frankfurt Stock Exchange and was Europe’s biggest IPO in over a decade.

‍👉 What happened: Now, Porsche has issued its fourth profit warning this year and warned that operating profits were expected to cop a €1.8 billion hit. The main reason? Weak demand in China for luxury cars as well as tariffs in the US, which is Porsche’s largest market.

‍👉 What else: To stem the bleeding, Porsche has shelved plans for a luxury EV SUV, and it’s also scrapped its own battery project and will double down on petrol and hybrid models of its cars. But Porsche's share price has skidded so far that Porsche will drop out of Germany’s DAX benchmark index.

‍What's the key learning?

‍💡Being part of a benchmark index isn’t just a vanity title, it can be a golden ticket to investment dollars.

💡When a company enters an index, based on its market size, it means that many passive funds and ETFs that track that index need to acquire its shares, and this can often drive demand that tends to push the company’s share price upward. On the flip side, if a company leaves an index, like Porsche, those same investments funds must sell their shares, which can create downward pressure.

💡Interestingly, a McKinsey study found that the stock price bump at inclusion is real… but mostly temporary. The effect of this spike or drop tends to level out within about two months after the change. For Porsche, losing its DAX spot might be a short-term financial setback, but it’s even more of a symbolic fall from grace.