April 25, 2023

Companies with Multi-Class Share Structures Now Eligible for S&P 500

Back in 2017, S&P announced that it would not add any new companies with “multi share class structures” to the S&P Composite 1500 Index and its component indices, including the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600.  As highlighted by this Simpson Thacher alert, under S&P’s restrictive eligibility criteria, this meant that companies going public with an “UP-C” structure with multiple classes—even with equal voting rights—were excluded, in addition to companies going public with high vote/low vote class structures.

S&P reversed course in a recent announcement, effective immediately. Here’s Simpson Thacher’s take:

Following a consultation with market participants that commenced in late 2022, on April 17, 2023, S&P announced that companies with multiple share classes will again be considered eligible for inclusion in the S&P Composite 1500 Index and its component indices provided they meet all other eligibility criteria. We believe this is the right outcome for investors who are looking to broad-based market indices to track the entire investable universe and permits companies seeking to go public to adopt the capital structures that best suit their circumstances without adversely impacting eligibility for future inclusion in the S&P Composite 1500 Index and its component indices.

– Meredith Ervine