Shares of RadNet (NASDAQ:RDNT), a company focused on outpatient diagnostic imaging services, jumped 14% as of 2:40 p.m. EST on Friday. The double-digit move is traceable to the news that the company is joining a small-cap index.
S&P Dow Jones Indices announced today that RadNet is replacing Gannett in its S&P SmallCap 600 index. This change goes into effect on Wednesday, Nov. 20.
S&P is making the change because Gannett is set to be acquired by New Media Investment Group soon.
Traders are bidding up RadNet's share price because funds that track the S&P SmallCap 600 index will be forced to buy its stock on Nov. 20th. Some traders are buying the stock today in an attempt to front-run that anticipated demand.
It is common for stocks to jump when news breaks that they are joining an index. However, the news shouldn't matter much to investors, since it has no effect on the company's operations. RadNet's investors should be happy about today's share price pop, but what matters most is the company's ability to execute against its growth plan.
RadNet is attempting to disrupt the medical imaging market by running freestanding offices at a lower cost than hospitals and sharing information in the cloud. If its plan works, this could be an interesting healthcare stock to follow.