Companies with multiple share class structures will be barred from inclusion in major stock indices, over concern that they treat shareholders “unequally”.
The US-based S&P Composite 1500 and its component indices will no longer accept companies with different classes of shares.
It will, effectively, bar the recently floated Snap from entering these indices, though existing constituents will not be affected. Snap’s multi-billion-dollar March IPO saw it offer new investors a class of stock with no voting rights.
S&P Dow Jones said companies with multiple share class structures “tend to have corporate governance structures that treat different shareholder classes unequally” with respect to voting rights “and governance issues”.
Snap was blocked last week from featuring on FTSE Russell indices because of the same issue. FTSE Russell, owned by the London Stock Exchange, decided that companies must offer at least 5% of non-restricted shareholder voting rights.
Its consultation on whether to accept multiple class share offerees into its indices began in April,with 68% of respondents agreeing that a minimum hurdle for voting rights should be imposed.
FTSE Russell said: “…The proposals set out in this document represent a pragmatic compromise between those that believe the Snap IPO set a dangerous precedent for companies to come to the market with few, if any, voting rights attached to their securities, and those respondents who believe the role of the index provider is to represent the investable opportunity set as comprehensively as possible.”