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After Snap’s decision to not give its shareholders voting rights, the S&P 500 has said it will begin excluding companies that issue different classes of shares.
It’s been a rough go ever since social media tech giant Snap (NYSE:SNAP) went public in March of this year.
The most recent turn of events for the company came on Monday (July 31), when the S&P 500 Index (INDEXSP:.INX) announced that it will begin eliminating companies that issue a range of classes of shares, which Reuters reported removes Snap from the index.
According to a press release from the S&P Dow Jones Indices, the decision is “effective immediately,” although existing S&P Composite 1500 companies that have different share classes will not be effected by the decision.
“Companies with multiple share class structures tend to have corporate governance structures that treat different shareholder classes unequally with respect to voting rights and other governance issues,” a statement issued by the index said.
Organizations on the S&P index like Google parent Alphabet (NASDAQ:GOOGL) and Berkshire Hathaway (NYSE:BRK.A)–companies that offer different share class structures–are two examples of companies that won’t be impacted by the decision.
When Snap went public earlier this year, its CEO Evan Spiegel and co-founder, Bobby Murphy made it so that the company’s shareholders wouldn’t have any voting rights. In other words, investors of Snap were not given a say in how the company operates.
Shortly after Snap began trading on the New York Stock Exchange, Reuters reported that a member of the US Securities Exchange and Commission (SEC) already had questions about the company’s unequal voting rights decision.
“Unequal voting rights present complex and new issues that need to be understood and addressed,” Commissioner Kara Stein said in the article. “We also must be mindful of the precedent being created.”
Now, Snap is struggling to stay afloat. Business Insider reported that the Index’s decision is a “blow to Snap’s share price because it means a large chunk of index funds and passive funds that are pegged to a benchmark like the S&P 500 won’t be buying the stock.”
Following Monday’s announcement, Snap’s share price had dropped 4.7 percent to trade at $13.16 as of 2:42 p.m. EST on Tuesday (August 1). Since the company went public back in March, it’s been nothing but downhill for Snap. On the company’s first day of trading, it reached a high of $27.09, but has dropped 46.20 percent year-to-date.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
