What happened
At times, the reason or reasons behind a stock's rise are obscure or mysterious. But that certainly wasn't the case with Collegium Pharmaceutical (COLL 3.45%) on Tuesday, which shot 9.8% higher thanks to a development that should dramatically raise its profile.
So what
Collegium, a biotech that has enjoyed success with its pain relief medication Xtampza ER, is about to become a component of the S&P stock index family.
Late Monday, S&P Dow Jones Indices -- the operator of the famous suite of indexes -- announced a change in its benchmark S&P 500 index.
Image source: Getty Images.
S&P 500 index component TechnipFMC is getting the boot and being replaced by Monolithic Power Systems. The latter is currently in the S&P MidCap 400 index, so its slot there will be filled by Iridium Communications.
Iridium is now on the S&P SmallCap 600 index, thus a replacement is needed for its position; Collegium is that replacement. The move is slated to take effect this Friday, Feb. 12.
Now what
Inclusion on a notable stock index, particularly one with the characters "S&P" in front of it and particularly for a less-known business like Collegium, instantly raises its visibility. It also, crucially, attracts the many index funds that prowl S&P lineups for their portfolios.
Naturally, greater prominence and attention doesn't necessarily mean an endless stock price lift -- Collegium still has to deliver for shareholders. But this is an extremely positive development for a company that has performed well lately.
