There hasn't been too much in the way of good news coming the way of BrainChip Holdings Ltd (ASX: BRN) shares or their owners in recent months.
Sure, there's the absolutely miserable share price performance, for one. As it stands today, Brainchip shares have lost more than 61% of their value in 2023 so far alone.
That stretches to almost 70% over the past 12 months. And the Brainchip share price remains down more than 83% from the all-time highs of more than $1.70 a share that we saw back in early 2022. See for yourself below:
But earlier this month, owners of Brainchip shares also found out that their company is set to suffer the indignity of being kicked out of the S&P/ASX 200 Index (ASX: XJO).
It was only in June last year that Brainchip shares were admitted to the ASX 200. Now, a mere 15 months after joining this somewhat exclusive club, the artificial intelligence (AI) share is politely being asked to leave.
So why are Brainchip shares getting kicked out of this club? And what does it mean for investors going forward?
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Why are Brainchip shares getting the ASX 200 boot?
Well, the ASX 200 Index is a stock market index that follows a specific set of rules.
For a share to be included in the ASX 200, it must fulfil market capitalisation, trading volume and liquidity requirements for one. But it must also be within the top 200 companies listed on the ASX by market capitalisation that fit these rules. After all, it's called the ASX 200 for a reason.
It's probably for this reason that Brainchip shares are set to leave the ASX 200. When the company was first included in the index last year, it was going for around 90 cents to $1 a share. Today, Brainchip is at 28 cents a share. At this pricing, the company has a market cap of around $488 million. That comes in at less than a third of what it was back in June 2022.
It's also less than half of some of the other bottom stocks of the ASX 200. That includes Polynovo Ltd (ASX: PNV) and Core Lithium Ltd (ASX: CXO). In contrast, one of the stocks that Brainchip is making way for in the ASX 200 is gold miner Ramelius Resources Ltd (ASX: RMS). Ramelius currently has a market cap of $1.28 billion.
When a company steadily loses value on the stock market, this loss of market capitalisation tends to flow through to trading volumes and liquidity. If no one is buying a company's shares, then its liquidity and volumes will obviously suffer.
What's next for this (soon-to-be former) ASX 200 stock?
So it's probably a combination of all of these factors that have led S&P Global to kick Branchip shares out of the ASX 200 next week.
This doesn't exactly bode well for the Brainchip share price going forward. Many fund managers are bound to only invest in ASX 200 shares. So Brainchip will now be off the radar for many of them. Plus, Branchip will now lose the benefit of having ASX 200 index funds having to buy its shares for their portfolios too.
If the company's fortunes (and share price) recover, then this AI share might have a shot at ASX 200 redemption one day. But until then, investors might have to be content with Brainchip as an ASX All Ordinaries Index (ASX: XAO) stock, and not an ASX 200 one.
