Image source: Tile Shop Holdings.

What happened

Shares of Tile Shop Holdings (NASDAQ:TTSH) climbed as much as 11% early Wednesday and then settled to close 9.6% higher following news that the specialty flooring company will join the S&P SmallCap 600 Index later this week.

So what

Specifically, Tile Shop will replace current S&P SmallCap 600 member Epiq Systems, a legal technology and services company whose shareholders earlier this week approved its previously announced acquisition by OMERS Private Equity.

According to a press release from S&P Dow Jones Indices, the change will take effect after the market close this Friday, Sept. 30.

Now what

It's rare to see a stock swing quite so much on its inclusion in an index. But we're also talking about a relatively volatile small-cap stock that previously struggled to sustain its past torrid rates of growth, at least until CEO Chris Homeister took the reins in early 2015 and implemented multiple initiatives to solidify the balance sheet, reduce employee turnover, and reignite that growth.

So investors could view Tile Shop's joining the S&P SmallCap 600 as an encouraging sign of relative stability, but it still shouldn't shift investors' focus from the actual business -- which is performing well of late -- as the central driver of the bullish argument for owning Tile Shop shares.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.