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Society Pass Jumps 48% On Addition To Russell 2000 Index – Possibly Too Much? 

Tim Worstall
Tim Worstall trader
Updated 20 Dec 2021
  • Society Pass Inc (NASDAQ: SOPA) has jumped 48% premarket.
  • The rise is on news it is to be part of the Russell 2000 Index from market open today.
  • Over $10 trillion in investment is benchmarked to that Russell 2000 Index
  • This will increase the demand for Society Pass stock – but how much? 

Society Pass Inc is a high-tech stock with a market focus on SE Asia. The company builds loyalty programs and eCommerce sites in the region. It’s also the poster child of the Vietnam high tech industry. All very interesting and possibly even noble but that’s not what is driving interest in the Society Pass stock at present.

The Society Pass IPO was back in November and the stock more than tripled when that happened – the peak price was just shy of $52. Since then, on not much news other than a vaguely disappointing quarterly report, the stock has moved down to Friday’s $3.30 or so. Yes, that’s three dollars 30, not thirty-three dollars. This cannot all be blamed on the quarterlies either, the falling off a cliff was 22 to 23 Nov, two weeks before that release of results.  

Looks like folks just became less enamored of the Society Pass story.

At which point we’ve got this 48% rise today. This doesn’t get anywhere near back to those glory days of only 6 weeks ago of course but a 48% rise to $5 or so (a 51% rise as it keeps changing) is worth having. The question becomes whether this is sustainable.

The rise is because of the announcement that Society Pass will be included in the Russell 2000 index. This is a subset of the wider market Russell 3000 – the 2000 is the smaller companies in the 3000, like the FTSE250 is the smaller ones in the FTSE350. There’s some $10 trillion in funds indexed to the Russell 2000 so at least some folks will have to buy Society Pass stock to be able to track the index properly. 

It’s not unusual for a stock to rise upon such an inclusion in an index. People who could ignore the stock now cannot, there is definitely some buying weight behind those index trackers. The big question though is how far is that weight going to push the stock?

For here’s one of the secrets of index tracking funds. They don’t have to own the index. In fact many to most don’t, they own a complex of instruments that track it, or are supposed to. Which leaves room for decisions about what should be the instruments used to track that index. 

Yes, addition to an index should mean more buying. But most index trackers have the option not to include one or more stocks. So how long this boost is going to last beyond the first day – or two or three – of the inclusion in the index is unknown.

Society Pass has jumped on the inclusion in the Russell 2-000 index. How long that price surge will last – even how far it will go – is the imponderable.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.