Red Hat to join S&P 500

Getting in often prompts a rally

Staff WriterJuly 18, 2009 

The financial turmoil that keeps claiming victims on Wall Street has created an opening for Raleigh-based Red Hat.

The software maker will replace floundering CIT Group in the iconic Standard & Poor's 500 Index next week. In addition to the cachet the move gives Red Hat, companies added to the S&P 500 typically rally as investors who track the index buy shares.

Red Hat's stock has climbed more than 50 percent so far this year on investor optimism that its cheaper Linux computer-operating software is winning customers during the downturn. On Friday, the stock closed at $20.60, down 26 cents, but it jumped as much as 10 percent in late trading after the S&P announcement.

The change will be made after the close of trading July 24. There are only a dozen publicly traded companies with North Carolina headquarters in the S&P 500. In the Triangle, that list includes only one: Raleigh-based Progress Energy.

S&P periodically adjusts its index, trying to keep a broad sample of the largest businesses and industries. It will drop stocks that have fallen too low or when a company is bought.

CIT Group's stock has plunged 85 percent this year, as investors sour on the financial firm's prospects. The company provides short-term loans for thousands of small businesses, mostly in the retail industry. On Friday, CIT scrambled to avoid bankruptcy, a move that could cut off financing for clothing makers, stores and other businesses.

Red Hat officials couldn't be reached for comment Friday.

alan.wolf@newsobserver.com or 919-829-4572

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