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.