Darktrace and Johnson Matthey were among five technology companies removed from the FTSE 100 on Sunday because of concerns over accounting practices and a corporate governance issue, according to a report in The Guardian.
Still, Britain’s largest market still welcomes globally renowned technology firms that have made a name for themselves in making digital solutions that underpin global business: Digital banking company TSB Plc (TOB) and cybersecurity firm Sophos Plc (SUNW) were also among the deletions.
The three companies that were removed by the exchange were all around three years old, and one of them, PureCircle Plc (NICL), announced its plan to be demoted from the market in the next two weeks. Another company, Land Securities Plc (LAND), has been excluded from the index for more than a year, with its exclusion having been made public in February 2016. Finally, the five companies have a combined market capitalization of $63 billion.
The FTSE deletions come amid fears about what makes companies eligible to be placed in the FTSE 100, said Neil Woodford, a partner at Woodford Investment Management.
“We have seen more and more financial difficulties over the past year, where companies that were supposed to be out performing have actually failed,” Woodford told The Guardian. “It may be because their stock market listing has blinded them to the problems they are having. The message should be very clear, look at the auditor, look at the regulatory regime.”
Since November, the four companies have received various punishments by the Serious Fraud Office, as well as being censured by the British markets watchdog, the Financial Conduct Authority.
“The FTSE 100 boards and audit committees should look closely at their own involvement in the growing crisis. We need a dramatic change in culture at the top, with the heads of FTSE 100 companies now publicly accountable for their governance and the process,” he said.
A spokesperson for the Financial Conduct Authority said the decision to exclude companies from the FTSE 100 is “a matter for the corporate governance committee of the FTSE.”
The Guardian also reported that Natwest Group Plc has agreed to pay $47 million to settle allegations that it systematically abused financial customers.