Initially there were reports that trouble seemed to be brewing at Europe’s second-largest carmaker (after Volkwagen), PSA Peugeot Citroen. This time, it seems that a rather large load has ‘hit the fan’ with the French carmaker getting de-listed from the European stock exchange – CAC 40. Peugeot shares may have been traded in Paris since 1925, but it’s also been a member of the CAC 40 index since it was created in 1987.
The reason for de-listing comes after Peugeot’s share prices have declined by more than 60% over the last 12 months and has been described as being “the weakest weight in the index,” by Exane BNP Paribas quantitative analyst – Christophe Wakim. PSA Peugeot Citroen will now make way for a Belgian chemical company, Solvay SA, which will take place on the 24th September 2012 and Peugeot will subsequently be listed within the CAC Next 20. The signifcance of being in the CAC 40 is that this index lists the top 40 companies with the “most significant values” out of 100 firms by way of market capitalizations.
As Europe’s economy flutters precariously in the economic winds, struggling to keep flight (so to speak), Peugeot has been wiping out 200 million Euros every other month for the last 12 months till it reached a whopping net loss of 819 million Euro, as reported by Peugeot’s CEO, Philippe Varin some time in July of this year.
The decision for Peugeot’s removal from the European index came about after a meeting of a 7-member scientific board of NYSE Euronext (a Euro-American multi-national financial services corporation), convened with Roland Bellegarde, the executive vice president for European listings and cash trading, at its helm. The meeting takes place every quarter to review the performance of certain stocks within the CAC 40 index.
The French carmaker has roughly over 100,000 employees in France alone, but now, it struggles to cut costs amidst declining European vehicle sales. However, according to certain analysts, Peugeot’s share prices could double-up quite quickly once European macroeconomic conditions improve – something that’s rather unlikely to happen any time soon.
Following Peugeot’s impending delisting from the CAC 40, the French car-maker could lose out through dis-investments by some index-backed investment funds. However, on a brighter note, with the delisting it could take the heat off Peugeot by slowing its share price’s rate of decent via short-selling, since it’s no longer in the ‘spot-light’.
Currently, there are calls for Peugeot to re-organise its industrial activities and cut its workforce followed by a global strategic alliance that would see them reduce their dependence on European sales, which accounts for roughly 50% of their total sales.
This is something that’s being touted as a strategic saviour for the French automaker if it is to continue its long-haul as an automaker. In short, Peugeot needs to further internationalize itself, and fast, if it wants to achieve their target of breaking even by 2014 following their massive reported loss this year. For the time being, let’s just hope it doesn’t turn out to be another ‘Saab’ story to tell.
