MBIA is being taken off the S&P 500 index this Friday, Standard & Poor's said late last week.
The company, which will continue to be traded on the New York Stock Exchange (NYSE), could face selling pressure from exchange-traded funds that track the nation's benchmark stock barometer.
"Companies in the S&P [500] have sort of a built-in sponsorship because many investors are required to hold some of their common stock so when a company gets removed it makes it more challenging to raise capital," said Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott. "But frankly, it's so challenging for the bond insurers to raise capital anyway that I doubt it will have a material impact."
David Guarino, spokesman for S&P's, said MBIA's market capitalization was "no longer representative" of the index. Indeed, at the close yesterday its market capitalization was $702.9 million, well short of the required $3.5 billion minimum level required by S&P's. Guarino acknowledged that MBIA's market cap has been below the threshold requirement for more than two years now.
MBIA would not comment on the decision. Since peaking in January 2007, company stock has fallen 95%, from $72.73 per share to $3.67 at Friday's close. Yesterday it fell another 7.6% to $3.39.
MBIA's main rival before the credit crisis, Ambac Financial Group, was taken off the S&P 500 in June 2008.
Last week, NYSE said Ambac must strengthen its share price to above $1.00 for the company to avoid being de-listed.
