S&P Dow Jones Indices Opens Door for Multi-Class Share Companies

Wilson Sonsini Goodrich & Rosati
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Wilson Sonsini Goodrich & Rosati

On April 17, 2023, S&P Dow Jones Indices (S&P DJI) announced a major change to its inclusion criteria. Effective immediately, all companies with multi-class share structures will be eligible for inclusion in the S&P 1500 Composite and its component indices, which include the S&P 500, S&P MidCap 400, and S&P SmallCap 600. This announcement is a significant shift from the previous restriction that had excluded multi-class share companies from being included in the indices.

The eligibility restriction for multi-class share companies was added in 2017 and had applied to future eligible companies, regardless of whether their classes of stock had equal voting rights (e.g., companies with Up-C structures), unequal voting rights, or no voting rights. However, the eligibility restriction did not apply to existing index constituents who were grandfathered in and remained in the indices. In October 2022, S&P DJI initiated a consultation process to solicit feedback from market participants regarding whether the eligibility restriction should be retained in its current form, modified, or removed.

The move to include multi-class share companies is significant because many technology companies have a dual- or multi-class share structure and were previously unable to qualify for these indices. The inclusion of multi-class share companies in the indices brings S&P DJI in line with other major index providers, such as MSCI and FTSE Russell, which already include multi-class share companies in their indices.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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