(Corrects quote in fourth paragraph)
By Ross Kerber
BOSTON, March 6 A group representing large
institutional investors has approached stock index providers S&P
Dow Jones Indices and MSCI Inc, looking to bar Snap Inc
and any other company that sells investors non-voting shares
from their stock benchmarks.
Both index providers have said they are reviewing Snap's
inclusion. Were Snap to be added to indexes such as the S&P 500
Index or the MSCI USA Index, then managers of stock index
portfolios will have to buy its shares and other investors,
whose performance is tracked against such indexes, would likely
Some big money managers worry about buying Snap’s Class A
shares because they have no voting rights, meaning those
shareholders will have no voice on matters like the company’s
future strategy or the pay of its executives.
"They're tapping public markets but giving public
shareholders no say," said Amy Borrus, deputy director of the
Council of Institutional Investors, which represents big pension
funds and other large asset owners, in an interview.
In reaching out to both index providers, she said, "What we
would like to see at the least is for the indexes to exclude new
no-vote companies." Meetings with both index providers are
scheduled this week, she said.
David Blitzer, managing director of S&P Dow Jones Indices
and chair of a committee overseeing its indexes, said they would
not add a new stock like Snap for 6 to 12 months after its IPO
in any case, and will use the time to study Snap's structure.
While the index provider does not have a hard requirement
about a company's voting structure, the committee needs to think
through how much influence investors should have, Blitzer said
in an interview on Monday.
" 'Who Votes?' is the issue right now," he said.
MSCI said on March 2 that Snap would qualify for
indexes including the MSCI USA Index but then said on March 3
that after additional analysis Snap did not meet all
requirements. Snap's inclusion into the MSCI USA Index will be
re-assessed in May, MSCI said in a statement on its website.
MSCI is seeking feedback from investors about whether
companies without voting rights should be included in indexes,
according to the March 3 statement. A spokesman did not
immediately provide further details.
A spokesman for Snap declined to comment.
Snap's $3.4 billion initial public offering of stock last
week marked the hottest technology IPO in three years as
investors snapped up shares of the Venice, California company,
even though its two co-founders retained near total control. The
situation alarms some big investors who fear other companies
might copy Snap's structure.
Other big S&P 500 companies like Facebook and Google
parent Alphabet also have non-voting shares but still
grant voting rights with other widely-traded shares.
After the council raised concerns about Snap's lack of
voting rights last month, Snap's chairman Michael Lynton wrote
back on Feb. 21 to point out a section of its prospectus stating
the voting structure "prolongs our ability to remain a
founder-led company" and that Snap will have a
majority-independent board, including himself.
Index inclusion requirements vary. For the S&P 500 a stock
typically needs a market capitalization of around $5.5 billion
and to have been profitable over the past four quarters, for
instance, Blitzer said.
(Reporting by Ross Kerber in Boston. Additional reporting by
Lauren Hirsch in New York. Editing by Bernard Orr)