Index-fund giant State Street Global Advisors is blasting
Snaps decision to go public with shares that have no
Snap, the parent of the popular Snapchat social media
platform, raised $3.4 billion in an initial public offering on
the New York Stock Exchange in March.
Voting is a basic principle of shareholder
rights, Lynn Blake, chief investment officer of global
equity beta solutions at SSGA, said in a phone interview.
The idea that Snaps decision could set a precedent
for future IPOs is really concerning.
Theres been a rise in the number of companies limiting
voting rights over the last few years, but Snap is the first to
make all publicly available shares non-voting, Blake said.
According to SSGA, the weight of companies with non-voting
shares has risen to 12 percent of the Standard &
Poors 500 index, from 5 percent in 2007.
SSGAs criticism of Snap stands out because index-fund
managers, which can invest in thousands of companies based on
benchmarks, have historically avoided getting into the
governance details of any one company.
Were concerned that companies will only be
willing to engage with us to the extent that we can lodge a
vote, she said. With partial or no voting rights,
is that really a public company?
Shareholders, by definition, are partial owners of a company
who should have influence over their economic interest,
according to Blake. Shareholder voting rights are particularly
important for index managers as they generally have no other
way to influence a company, she said, as passive managers
cant sell shares.
Companies are limiting shareholder rights in part to fend
off the growing number of activist investors, Blake said. SSGA
wants U.S. stock exchanges to change their rules to prevent
companies from listing if they limit voting rights. While index
providers like MSCI, FTSE and S&P could also play a role by
excluding such companies from benchmarks, Blake says regulators
could likely help the most by introducing rules on listing
That could solve the issue at the beginning of the
problem, she said. SSGA can exclude certain companies
from its funds, she added, but thats only a short-term
solution and we would like to see the problem