Snap Inc. (SNAP), maker of the messaging app Snapchat, was dealt another blow after Standard and Poor's announced it wouldn’t be part of the S&P 500 Stock Index.

In a statement, S&P Dow Jones Indices said it is no longer including shares of public companies that don’t give investors enough voting rights. The change takes effect on Aug. 1 and existing companies on the S&P will be excluded from the new rule. "Companies with multiple share class structures tend to have corporate governance structures that treat different shareholder classes unequally with respect to voting rights and other governance issues," S&P Dow Jones Indices said in a statement. "Therefore, S&P DJI's U.S. Index Committee will no longer consider these company structure types as future replacement candidates for the S&P Composite 1500 and its component indices, including the S&P 500." The S&P isn’t the only index to exclude the social media network operator because of voting rights concerns. The FTSE Russell, which is a unit of the London Stock Exchange Group, has already kicked Snap off of its indices. (See also: Snap Loses Top Lawyer as Stock Continues to Sink.)

Centralized Power

Snap has faced pressure from corporate governance watchers ever since it went public in March because of the lack of voting rights going to shareholders. A few days after its IPO debut, the Council of Institutional Investors, which represents big institutional investors such as pension funds, voiced concerns about the voting structure given essentially all the publicly available shares of the company have no voting rights, leaving almost all of the voting power in the hands of the company's founders and insiders. At the time, the council reached out to MSCI​ and S&P Dow Jones regarding its inclusion in indexes provided by those firms. Hedge funds have also criticized the voting structure, contending it will put too much power in the hands of management and leave it unaccountable to its investors. Its voting structure has also raised concerns it may not be able to join big-name exchanged traded funds (ETFs). (See also: Which Hedge Funds Bought Snap Last Quarter?)

The S&P’s move comes at a time when the social media company is struggling with lackluster user growth, concerns that it won’t be able to boost advertising revenue growth and a stock price that now trades below its IPO price of $17 a share. Its prospects have gotten so bad that it prompted Morgan Stanley to lower its rating on the stock to equal weight from overweight and slashed the price target to $16 from $28 in July. What makes Morgan Stanley’s call noteworthy is the fact the investment bank helped take Snap public in March.




Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.