Shares in Xero and Diligent Board Member Services rallied today after the locally-listed tech-companies were flagged as the latest entrants to the benchmark NZX 50 index.
Xero climbed 4.2 per cent to $4.27 valuing the company at $453.5 million while Diligent rose 2.6 per cent to $3.50 giving it a market capitalisation of $286.7 million after the NZX yesterday said the companies met the ranking and liquidity requirements to join the index of the top 50 companies on June 18.
The tech companies will replace struggling GPS-components maker Rakon and building supplies manufacturer Steel & Tube. Shares in Rakon fell 2 per cent to 48 cents, while Steel & Tube dropped 4.6 per cent to $2.08.
The index shake-up comes as the stock exchange operator prepares to introduce new methodology from June 15 to the way it weights companies on the index to a 'pure free float', meaning only shares not held in a majority stake will be counted.
It will also impose tougher liquidity requirements for entry to the NZX 50, where at least 2.5 per cent of a company's market capitalisation will have to change hands over a six month period.
For Xero, that means $11.3 million worth of shares will have to trade in a six-month period, while Diligent will need $7.2 million of stock to move.
About 40 per cent of Xero is held by the software accounting firm's two biggest shareholders, Rod Drury with 21 per cent, and MYOB-founder Craig Winkler with almost 20 per cent.
Diligent's biggest shareholder is fund manager Milford Asset Management with about 9 per cent.