Each year the NASDAQ stock market compiles a list of the top 100 non-financial companies in the world based on criteria not limited to, but heavily dependent on, a company’s fiscal performance over the preceding 12 months. Last year both EA and Activision were on the list. This year only Activision made the cut. The reason?
Where does one start?
Perhaps it was the 40-percent drop experienced by EA shares since December of 2011. Or maybe it was the perceived failure of BioWare’s Star Wars: The Old Republic, a big-budget MMO that was supposed to supplant World of Warcraft as the king of the genre, before the publisher changed course and decided the game should instead adopt the free-to-play business model only a few months after its debut. Then again, maybe the NASDAQ officials are just huge basketball fans miffed that EA canceled NBA Live ’13.
Whatever the reason, at least EA can take solace in the fact that it’s among good company. Other notable firms dropped from the NASDAQ-100 include Netflix and RIM (the company behind the archaic yet surprisingly ubiquitous Blackberry).
Though NASDAQ isn’t in the habit of explaining each of its ranking decisions directly, NASDAQ executive vice president NASDAQ John L. Jacobs did offer a catch-all statement to explain the rationale behind this year’s Index. Most of it is congratulatory toward those companies new to the list, but it does include the following:
Our objective re-ranking process ensures the NASDAQ-100 remains a relevant investable index that is the underlying benchmark for about 7,100 products in 22 countries with a notional value of about $1 trillion.
Further, Jacobs claims that all companies on the list must comply with NASDAQ’s established guidelines for the NASDAQ-100 Index (and that those not on the list are not in compliance). A full list of those guidelines can be found on NASDAQ’s website, though it does little to explain specifically why EA fell from grace.
What does this mean for EA? Well, the NASDAQ-100 is a list designed to highlight the 100 best companies to invest in in any given year. If you slip from the list, your firm is less likely to receive crucial investment money. While we doubt EA is going to face bankruptcy as a result of this decision, it’s certainly not great news for the publisher. Hopefully it can use this black spot as motivation to do better during the course of 2013.