Rightmove is expected to be relegated from the FTSE 100 to the FTSE 250 index next week, following months of declining share prices that have reached five-year lows.
The property portal’s share price has fallen consistently in recent months, with the company’s market capitalisation dropping below the threshold required for inclusion in the London Stock Exchange’s index of the top 100 listed firms. If confirmed, the demotion would move Rightmove to the FTSE 250 index of mid-cap companies.
Investment spending impacts valuation
The share price decline accelerated in November following a trading update in which Rightmove announced plans to invest £60 million over three years in artificial intelligence and product development. The company warned this spending would impact near-term profitability.
Rightmove forecast revenue growth of 8-10% and profit growth of 3-5% for the current year during what it termed an “investment phase”. The company stated the additional expenditure would support “double-digit profit growth” in subsequent years.
This week, Rightmove launched a ChatGPT-powered property search application as part of its AI strategy. The company is scheduled to release its full-year results tomorrow.
Market sentiment shifts on technology spending
Dan Coatsworth, Head of Markets at AJ Bell, noted the timing of the share price decline. “It’s no coincidence that Rightmove’s shares have been in steady decline since announcing last November it would make AI-related investments,” he said. “A year earlier, any mention of AI would have been cause for celebration. Now it’s a suggestion that Rightmove is having to move with the times and investors are jittery about companies spending on tech.”
The potential index change comes during a period of tension between Rightmove and estate agencies over the portal’s fee increases. The demotion would mark a setback for the company’s market positioning and could affect its weighting in investment portfolios tracking FTSE indices.
