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FTSE Russell Excludes Low and No Vote Shares From Indicies in Major Blow to Snap, Blue Apron

The FTSE Russell on Wednesday moved to exclude companies with non-voting rights and those with extremely limited public voting rights from equity indices, including the Russell 3000, after institutional investors expressed outrage over Snap Inc.'s (SNAP) move earlier this year to make an initial public offering with shares holding no voting rights.

The FTSE Russell move is a major defeat for the company behind the Snapchat app because it means that many major institutional investors, including big pension funds, won't be investing in it any time soon. However, it was also a blow for Blue Apron Holdings Inc., (APRN) which also will be excluded, for now from the FTSE Russell indices, because they offer very limited voting rights to outsiders.

"Clearly, Snap conducting an IPO with zero voting rights has casued institutional investors to raise this as an issue," said FTSE Russell CEO Mark Makepeace in an interview. "About 70% of those we consulted wanted change, so it wasn't a small minority. This allows public shareholders to have a voice. If there were zero voting rights they wouldn't be able to publicly express their support or disapproval of practices in which companies are meant to seek their approval."

In a statement FTSE Russel said that the measure, which is expected to be approved next month and implemented in September, represents a compromise between those who thought Snap "set a dangerous precedence" and those who thought the index provider's role was to represent the investable opportunity as comprehensibly as possible.


The move was a victory for institutional investors, who argue that Snap is permanently unaccountable to shareholders. It also was a win for activist hedge funds, who seek to use the votes attached to shares they buy to launch share-price improving and M&A campaigns at public corporations.

Many big index funds, exchange-traded funds, and public pension funds invest passively following major indices, such as the Russell 3000.

The FTSE Russell will require corporations to have at least 5% of the company's voting rights in the hands of unrestricted public shareholders in order to participate in their indices. Companies that don't have at least 5% of their...


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