What happened
Shares of Genomic Health (GHDX) jumped 14.9% on Wednesday after the S&P Dow Jones Indices, a division of S&P Global (SPGI 0.54%), said the cancer test-maker would be joining the SmallCap 600 index. Genomic Health is replacing Electronics For Imaging, which was acquired by Siris Capital Group.
So what
Genomic Health won't actually be added to the index until Monday, but traders were clearly buying today in the hopes that the share price will be buoyed even more by exchange-traded funds and mutual funds that that will buy shares to match the makeup of the index.
This rally, and perhaps another on Friday or Monday, is likely to be short lived because it's related to the relative number of investors and traders who are interested in buying and selling shares, and doesn't have anything to do with the underlying value of the genetic test-maker.
Image source: Getty Images.
Now what
Genomic Health's ultimate value will be determined by its revenue and earnings, which should be released in the coming weeks. The company started out the year with a strong first quarter, but guidance implied a substantial slowdown in growth in the second half of the year.
