Snap Inc. has already experienced the highs and lows of the stock market in the week since its NYSE listing.
Wednesday shares closed at $22.81, down from last week’s high of $29.44, but still above the $17 IPO price.
That performance has raised questions over if, rather than when, Snap will join the S&P 500.
S&P and Dow Jones Indices prefer initial public offerings to be “seasoned” for six to 12 months before being considered for an index.
After that, other eligibility requirements would be assessed. Snap would easily pass some of these, such as having a primary listing on one of the US exchanges and having the US portion of fixed assets and revenues making up the total.
Much has been made of Snap’s decision to sell shares in the IPO with no voting rights, but a more straightforward question would trouble the index manager in the first place. Snap would have to be profitable, in total, across the past four quarters, including the recent three months.
Last year, Snap lost more money than it made in revenues, a net loss of $515m versus sales of $405m which could delay index membership, unless Evan Spiegel, the co-founder and chief executive, can manage a dramatic improvement.
One of the criteria for entry into the S&P 500 is a corporate governance structure that is consistent with standard US practice. It is unclear how this may, or may not pertain to Snap’s decision to sell non-voting shares at the IPO, a first in the US.
If a company meets all requirements and is selected, the moment of entry into the index may hinge on practical matters. “The biggest factor usually is figuring out how to add a company with the least amount of disruption,” Mr. Blitzer said.