The Kogan.com Ltd (ASX: KGN) share price has continued its poor run and is tumbling lower again on Monday.
In morning trade, the ecommerce company’s shares are down a further 4% to a new 52-week low of $7.40.
This means the Kogan share price is now down 66% from the 52-week high of $21.89 it reached in January.
Why is the Kogan share price falling?
Investors have been selling down the Kogan share price this year after its strong form during the pandemic ended abruptly.
This was driven by a sharp slowdown in sales after bricks and mortar stores reopened and management’s failure to anticipate this. The latter led to Kogan building up its inventory materially and then being unable to shift it. As well as having to discount products, warehouse costs increased and Kogan incurred demurrage fees for inventory stuck at the port with nowhere to go.
Unfortunately, the pullback in the Kogan share price has knocked somewhere in the region of $1.6 billion off its market capitalisation since January, which has led to its latest bit of bad news.
What has happened?
After the market close on Friday, S&P Dow Jones Indices announced changes to the S&P/ASX Indices following a quarterly review. These are effective prior to the open of trading on 20 December.
One of those changes is the removal of Kogan from the benchmark S&P/ASX 200 Index (ASX: XJO). This is due to its market capitalisation no longer being at a level that makes it one of the 200 largest companies on the Australian share market.
This could be bad news for the Kogan share price for a couple of reasons. One is that index funds that mirror the ASX 200 will now sell its shares and buy the new additions to the index instead.
The other reason is that some fund managers have strict mandates that mean they can only invest in shares on certain indices. This means that even if a fund manager is positive on Kogan turning around its disappointing performance, it will have to sell its shares when the changes are made if it can only own ASX 200 or higher shares.
This could add to the selling pressure on the Kogan share price, much to the delight of short sellers which continue to target it. This morning I revealed that Kogan remains the second-most shorted share on the ASX with 12% of its shares held by short sellers.