“WorldCom has plenty of problems, and well-publicized ones. But does it really deserve to be exiled from the Standard & Poor’s 500?” asks Floyd Norris in today’s New York Times.

“WorldCom, the telephone company that faces a Securities and Exchange Commission investigation of its accounting and has suffered the indignity of having its bond rating cut to junk, was booted out of the S.& P. 500 index at the close of trading yesterday.”

“While S.& P. makes a lot of changes in the index — the ones that took effect yesterday were the eighth and ninth of 2002, after 30 moves in 2001 and 57 in 2000 — the move was in one way unprecedented.”

” ‘This is by far the largest’ company ever dropped from the index while the stock was still trading, said Howard Silverblatt, an editor at Standard & Poor’s Quantitative Services and the keeper of data on the index. The only larger companies removed were dropped after they were merged out of existence.”

“At the close of trading on Monday, WorldCom had fallen to $1.44 a share. But with nearly three billion shares outstanding, it had a market capitalization of more than $4 billion. Ranking the 500 companies in the index by market value, it did not even hit the bottom 100. In fact, it was No. 373, meaning that there were 127 companies in the index that were worth less than it was, at least in the market’s view.”

“Nonetheless, S.& P. announced that night that WorldCom was coming out, effective at the close of trading yesterday. US Airways, which has suggested it may seek bankruptcy protection, was also removed. But by the time it went out it had a market value of just $200 million, giving it the smallest value of any company in the index.”

“Mr. Silverblatt said yesterday that his search of records had shown that no company with even a $3 billion capitalization had been taken out. He said he was not sure what the largest previous removal was.”