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FTSE Russell turns to investors on Snap voting rights quandary
March 8, 2017 / 6:37 PM / 9 months ago

FTSE Russell turns to investors on Snap voting rights quandary

    By Ross Kerber
    BOSTON, March 8 (Reuters) - FTSE Russell will consult with
big investors on whether to include companies like Snap Inc
         in its widely followed  stock indexes even if their
shares lack voting rights, an executive said. 
    The issue will be studied at meetings with asset managers
and other clients this month, Joti Rana, Americas head of
governance and policy for FTSE Russell, said in an interview on
Tuesday. FTSE Russell offers popular indexes like Britain's
blue-chip FTSE 100 and the Russell 3000 index of U.S. companies.
    The meetings will give investors a chance to voice concerns
that companies like Snapchat owner Snap, which sold $3.4 billion
of non-voting shares in its initial public offering last week,
are denying outside stockholders influence on matters like
corporate strategy and executive pay.             
    Snap would benefit if it were added to major stock indexes
because index portfolios managers would have to buy its shares,
and other investors whose performance is tracked against such
benchmarks would likely follow suit.
    "If our client doesn't want non-voting shares in the index,
that's something we need to seriously take on board" for
consideration, Rana said. 
    Outcomes could be to exclude companies like Snap from
indexes, or to create indexes with new corporate governance
standards.
    "All options are on the table," he said.
    Clients of FTSE Russell, part of the London Stock Exchange
Group,         include big fund managers like BlackRock Inc
        and T. Rowe Price Group         , Rana said. Their input
could make the meetings a test of how far the companies will go
to back up their recent focus on shareholder rights, amid
concerns other companies might copy Snap's structure.
            
    Spokespeople for BlackRock and T. Rowe Price declined to
comment on the index reviews.
    Another client is State Street Corp,         Rana said. Lynn
Blake, who oversees $1.4 trillion in passive equity strategies
at the Boston company's State Street Global Advisors investment
arm, said Snap's structure is "highly unusual" and that the
trend of companies offering diminished voting rights for outside
investors is "certainly a concern."
    State Street's passive funds largely have not had to buy
Snap because so far the company has not been included in major
stock indexes, she said. But State Street will discuss with
index providers their methodologies because companies like Snap
should not be ignored, whatever their governance structures, she
said.
    "The passive philosophy is to own the market, and these
companies are part of the market," Blake said.
        
    PRESERVING CONTROL
    Venice, California-based Snap faces criticism of its
unprecedented decision not to grant voting rights with the Class
A shares it sold in last week's offering, the biggest
U.S.-listed tech IPO in three years. An investor committee that
advises the U.S. Securities and Exchange Commission was
scheduled to question Snap's transparency for investors on
Thursday.             
    A number of technology companies have offered shares with
reduced voting rights for outsiders in recent years including
Facebook Inc        and Google parent Alphabet Inc.          
    Asked about the index reviews, a Snap spokesman cited 
comments from the company's registration statement that the
voting structure is good for investors as a way to preserve
founder control. The Snap spokesman declined to comment further,
citing a regulatory quiet period.
    After a strong debut, shares of Snap fell earlier this week
after analysts gave the company lukewarm reviews. The company
has raised eyebrows on Wall Street because of its lofty
valuation and slowing user growth. 
    Snap shares pared some of those losses and were up about 9
percent at $23.34 at midday on Wednesday. 
    Index providers S&P Dow Jones Indices and MSCI Inc have also
said they are reviewing their treatment of Snap.
    FTSE Russell initially planned to add Snap to indexes, but a
revised analysis showed it did not meet a market capitalization
requirement, Rana said. Rana said Snap will be considered for
inclusion in specific indexes later this year, in addition to
this month's policy meetings.
             

    
 (Reporting by Ross Kerber in Boston. Additional reporting by
Heather Somerville; Editing by Meredith Mazzilli)
  

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