We had the opportunity to connect this week with Kian Salehizadeh, Senior Analyst and Manager of the Drone Index at Reality Shares. Reality Shares is an ETF issuer and index provider based in San Diego California and has created the first DRONE STOCK INDEX.
How many companies are in the index and how do you select these companies?
There are currently 44 Index constituents. The companies in the Index are grouped into two categories, Primary and Secondary, based on their direct contribution to and impact on the industry. Index components are weighted based on the Reality Shares Drone Score™. The Drone Score is calculated based on four factors: The net economic impact from drones for the company, the percent of total revenue derived from the drone aspect of the business, the company’s tier, and the expected growth in the company’s contribution to the drone sector. There must be global representation within the Index, and the minimum market cap for inclusion is $100 million.
Why are certain companies more represented in the index than others?
Primary companies are given a higher weight in the index, and the constituents are weighted in the Index according to their respective Drone Scores.
We have heard of Drone Pure Plays? What are they and are there any pure plays in the Drone Index ?
Pure plays are those companies focused entirely on the drone space (meaning they derive their revenues exclusively from drones). There are a few pure plays in the Index, including Aerovironment and Parrot. These are weighted more heavily in the Index as they are Primary companies.
When is the baskets of companies and participation percentage changed?
Current constituents and potential newcomers to the Index are reviewed semi-annually for eligibility (in June and December), and the weights are reset accordingly.
If a large player like DJI were to go public, how quickly could we expect to see them in the index?
Although the Index components are reviewed semi-annually in June and December, the committee in charge of the Drone Index can make ad-hoc decisions to include/remove companies at any time if the situation warrants review. DJI, the largest drone company in the world, going public would certainly be one of these situations.
Where can someone go to find all companies and participation percentages?
The top and bottom holdings in the Index are published daily on ISE’s website: http://www.ise.com/etf-ventures/index-data/reality-shares-drone-index-rsd/. The full constituent list is available on the IFLY ETF website.
Alan is serial entrepreneur, active angel investor, and a drone enthusiast. He co-founded DRONELIFE.com to address the emerging commercial market for drones and drone technology. Prior to DRONELIFE.com, Alan co-founded Where.com, ThinkingScreen Media, and Nurse.com. Recently, Alan has co-founded Crowditz.com, a leader in Equity Crowdfunding Data, Analytics, and Insights. Alan can be reached at alan(at)dronelife.com