Stock market heavyweight SAP: Too fat for the DAX?

The shares of the Walldorf-based software group SAP have gained significantly in value this year and exceeded the cap of the DAX stock market index for the first time, as reported by the Handelsblatt. This most important German stock market index comprises the 40 largest companies listed on the Frankfurt Stock Exchange in terms of market capitalization. According to its own regulations, none of the companies may account for more than 15 percent of the index. This is intended to prevent individual stocks from dominating the index and the DAX from losing its informative value as an indicator of the German economy.

SAP is currently the clear number one in the DAX, followed at a considerable distance by Siemens, with a share of less than nine percent. Compared to last November, the SAP share has increased in value by around 76 percent. According to data from the portal börse.de, SAP is currently just under the cap again, with a 14.93 percent DAX share and a market capitalization of around 256 billion euros. Considering the bubbling profits, however, a further rise in the software company's share price seems very likely.

Index funds would have to sell SAP shares

For SAP, the success of its own share could turn into the opposite if the cap is constantly exceeded. Every three months, the providers of index funds and ETFs make index adjustments. If SAP exceeds the 15 percent threshold, the providers would have to sell SAP shares to comply with the cap. Such sales are then likely to have a negative impact on SAP's share price.

This is precisely what happened to the industrial gas specialist Linde, which had already broken through the DAX cap. At the time, this was still at 10 percent. Linde subsequently delisted from the German stock exchange in January 2023 and transferred all its shares to the New York Stock Exchange. Linde thus also left the DAX. In spring 2024, Deutsche Börse then raised the DAX cap to 15 percent, but this was apparently not enough for SAP's soaring share price.

When asked by the iX editorial team, SAP explained that it would welcome an increase in the cap. "Our priority is to attract foreign capital here – especially from the USA because that's where the pockets are deepest – and not to turn our backs on Germany as a financial center," said CFO Dominik Asam. He also told Handelsblatt that SAP was already in talks with Deutsche Börse. In addition to the German Stock Exchange in Frankfurt am Main, SAP shares are also listed on the New York Stock Exchange.

(axk)