After traders learned that its stock will soon become part of a small-cap index, shares of FormFactor (NASDAQ:FORM), a company that sells semiconductor testing equipment, jumped on Wednesday. As of 11:05 a.m. EST, the stock was up 10%.
Investors recently found out that FormFactor's stock will soon be joining the S&P SmallCap 600 index. This news is causing FormFactor's share price to rise today because all of the funds that track the S&P SmallCap 600 will soon be forced to buy shares of the company.
The S&P SmallCap 600 index has an open slot because Calgon Carbon will be removed soon, as it is being acquired by Kuraray Co. in the next few days.
FormFactor is set to officially join the S&P SmallCap 600 index prior to the open of trading on Monday, March 12.
While FormFactor investors should welcome today's jump with open arms -- especially after shares were mauled following the company's fourth-quarter earnings report -- they need to keep in mind that this move will not have any impact on the long-term health of the business. Given that management has already indicated that the next few months will be challenging, I think that the smart move is to cheer this company on from the sideline.