Every June, the investment world buzzes about shakeups in the Russell stock indexes. Why June? Because that’s when FTSE Russell rebalances its U.S. indexes, adding and removing publicly traded companies on its catalogues to accurately weigh them by market capitalization. This rebalance provides valuable insight into current market trends, as investors have a chance to see which companies are added to and deleted from these indexes.
Last week, Verb became part of the discussion by announcing that it had been added to the Russell Microcap® Index as part of the 2020 Russell indexes reconstitution. Membership in the Russell Microcap® Index, which remains in place for one year, means automatic inclusion in the appropriate growth and value style indexes.
So, what exactly is the Russell Microcap Index? And what exactly does this announcement mean for our investors? Keep reading to find out.
The Basics of Microcap Investing
Before we get into discussion about the Index itself, you may find a brief description of microcap investing to be beneficial. A microcap is “a publicly-traded company in the U.S. that has a market capitalization between approximately $50 million and $300 million.” In fact, microcap investing is generally known to represent the smallest public companies in the U.S. equity market. But, don’t let the word ‘small’ concern you—these companies represent HUGE potential for investors. Why? There are three main reasons:
- They provide an opportunity to invest early in companies like Verb that are still in the beginning stages of their growth cycle. Haven’t we all wished at some point that we could go back in time and buy stock in companies like Apple and Google? Well, at one point, they were small companies, too.
- They have a tendency to respond to market movements differently than larger company’s stocks, which can be hugely beneficial during times of widespread economic downturn.
- They provide “compelling risk-adjusted returns over the long term.” That’s because stocks from smaller companies tend to outperform stocks from large companies.
What is the Russell Microcap Index?
The Russell Microcap Index is one of the indexes provided by FTSE Russell, a British provider of stock market indices and associated data services. Like other stock market indexes, it measures a subset of the stock market in a way that “helps investors compare current price levels with past prices to calculate market performance.”
According to its website, the Russell Microcap Index “measures the performance of the microcap segment of the U.S. equity market. Microcap stocks make up less than 3% of the U.S. equity market (by market cap) and consist of the smallest 1,000 securities in the small-cap Russell 2000® Index, plus the next 1,000 smallest eligible securities by market cap. The Russell Microcap Index is constructed to provide a comprehensive and unbiased barometer for the microcap segment trading on national exchanges. The Index is completely reconstituted annually to ensure new and growing equities are reflected and companies continue to reflect appropriate capitalization and value characteristics.”
Simply put, as a leading provider in benchmarking, analytics data solutions for investors, FTSE Russell’s microcap index provides a way for investors throughout the world to gauge the progress of their investments. It’s known throughout the industry as a valuable tool for examining microcap trends.
What Does it Mean for Verb?
In layman’s terms, being added to the Russell Microcap Index provides Verb increased visibility and prominence, which are vital in helping us toward our ever-present goal of maximizing shareholder value. And, since FTSE Russell determines membership for its Russell indexes primarily by objective, market-capitalization rankings and style attributes, the addition points to growing awareness of Verb’s overall value.
“We are pleased to have earned our inclusion in the Russell Microcap Index,” stated VERB CEO Rory J. Cutaia. “We expect that this recognition, together with our other 2020 initiatives will increase VERB’s exposure within the broader investment community and provide an opportunity to expand our stockholder base.”
At Verb, we’re doing our best to inspire action every day, and have high hopes that this is just the first of many similar announcements. If you’d like to learn more about our company or products, there’s never been a better time to take a closer look. Contact us today!