Zip and these shares have been kicked out of the ASX 200 index

These ASX 200 shares were dealt a blow…

A man walks dejectedly with his belongings in a cardboard box against a background of office-style venetian blinds as though he has been giving his marching orders from his place of employment.

Image source: Getty Images

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The Zip Co Ltd (ASX: ZIP) share price just can't catch a break these days.

After the market close on Friday, the buy now pay later (BNPL) provider's shares were dealt another blow.

What's happening?

According to an announcement out of S&P Dow Jones Indices, it will be kicking out Zip's shares from the ASX 200 index at the next rebalance.

The index provider appears to have made the move after Zip's market capitalisation dropped to such an extent that it was no longer among the 200 largest companies on the Australian share market.

Based on the current Zip share price of 87 cents and the 687,983,539 shares on issue, the BNPL provider's market capitalisation is a touch under $600 million.

Other tech exits

But Zip won't be the only removal from the index. It will have a few tech shares to keep it company on the long walk to the exit later this month.

Embattled payment company EML Payments Ltd (ASX: EML), location technology company Life360 Inc (ASX: 360), and sports betting company Pointsbet Holdings Ltd (ASX: PBH) will also be removed from the ASX 200 before the market open on 19 September.

Unsurprisingly, given the state of the tech sector right now, none of their peers will be replacing them. Among the new additions are gold producer Capricorn Metals Ltd (ASX: CMM), energy producer Karoon Energy Ltd (ASX: KAR), and lithium developer Sayona Mining Ltd (ASX: SYA).

Another removal of note is AVZ Minerals Ltd (ASX: AVZ). Remember it? This lithium share exits the ASX 200 index after just six months in it. Though, the embattled lithium developer has spent a good portion of this time suspended from trade due to an ownership dispute.

Interestingly, AVZ also has the ignominy of being kicked out of the ASX 300 index as well. Ouch!

What does this mean?

As fund managers often have strict mandates allowing them to only invest in shares in particular indices, such as the ASX 200 index, they could be forced to sell Zip and the others between now and the rebalance.

This has the potential to put extra pressure on the sell side at a time when the buy side is already very weak.

Motley Fool contributor James Mickleboro has positions in Life360, Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended EML Payments, Life360, Inc., Pointsbet Holdings Ltd, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended EML Payments. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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