Shares of Seagen (NASDAQ: SGEN) surged in late-afternoon trading on Friday, ending up 15.2% for the day. The catalyst appears to be rumors that the biotech could be included in the S&P 500.
Short-term traders will often buy companies before they enter an index because their inclusion will spark exchange-traded funds and mutual funds that follow the index to buy shares, which can put upward pricing pressure on the stock price.
If the rumor is false, it seems likely that shares of Seagen will retreat next week. Even if the rumor turns out to be true and shares jump a little higher after the biotech is included in the index, they’ll likely eventually fall back down to where the valuation makes fundamental sense.