Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$.
You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company.
You then rotate out a company for a new one. The index is still 100 G$, but to match the index you are contractually required to sell your 20% ownership of the old company and are contractually required to buy 20% ownership of the new company.
However, the newly added company only released 5% of its shares to the public and the founder kept hold of the remaining 95%. Those fund managers are contractually obligated to buy 20% of the newly added company, but only 5% is available. Like a short squeeze, where the squeezer buys and holds supply so there are not enough purchasable shares to cover the shorts (obligated ownership), this is a financial divide by zero.
To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want.
That is the scheme described: how to short squeeze pensions who do not even have shorts for fun and profit.
It seems the S&P 500 indices only take the free-float shares into account when calculating weights:
S&P DJI’s market cap-weighted indices are float-adjusted – the number of shares outstanding is reduced
to exclude closely held shares from the index calculation because such shares are not available to
investors.
I think the xAI acquisition was a big tell though. How could a brand new, mostly irrelevant AI platform suddenly be worth over a hundred billion? No one can believe that xAI is somehow worth even a third of what Anthropic is worth, let alone most of what Anthropic is worth.
People put up with various other misleading claims or exaggerations. Battery tech. Roadster. FSD. But now the scheme of lying and manipulating things is so obvious. Not just with xAI but also the subscription switch for FSD. And the absurd push for space based datacenters. And the corruption involved in DOGE, as well as pushing to quickly secure FAA approval for 1 million satellites before this administration is kicked out of power at the midterms.
It’s clear this is one big scam, and unfortunately it may end up working. If they end up getting enough capital raised in an IPO, they may be able to use that capital to mostly catch up on the claims Musk has made.
This Musk guy makes Ponzi look like the Pope.You almost have to admire
it the way you admire a raccoon breaking into a triple locked trash can at 2 AM.
You are furious. You know you should be furious. But part of you is at
the window wondering "how did he do that?". As you will see below,
this raccoon is getting the trash can manufacturer
to remove the lock for him first.
This is how retail investors are about to get played by the SpaceX IPO:
First they only release 5% to 10% to create an artificially inflated price.
Its called the low float strategy...
Also...the Nasdaq 100 inclusion is supposed to be earned. You list, trade for up to a year at least, prove you are stable and then maybe you might be selected for inclusion. That rule protects the millions of people whose retirement money is in index funds.
But Musk told Nasdaq "fast-track me or I list on NYSE... so the Nasdaq
invented a "Fast Entry" rule out of thin air....15 trading days and you are in.
They openly admitted it was designed for SpaceX. S&P is now considering the same
thing for the S&P 500, which has around $24 trillion in assets tracking it.
Why does this matter? The second SpaceX hits these indexes, every passive fund
is forced to buy, your 401k, your Vanguard fund, your target date fund.
All buying SpaceX at whatever inflated price it opens at, with zero public track record. Nobody asks you.
With the index inclusion and the implication of massive institutional liquidity
you have a clean exit for the insiders. After lockup expires, Musk and early investors dump the artificiality rarefied shares (it seems only 5% to 10%)
into a pool of demand that was artificially created by forced passive buying.
Your retirement money is their exit liquidity. Madoff went to prison for funneling new investor money to pay old investors. This is funneling passive investor money to inflate the price so insiders can cash out.And the exchange itself is rewriting the rules to make it happen.
The saving grace of the SP500 and most similar indexes is that they are cap-weighted. So if SpaceX only, floats 5% only that 5% of their capitalization counts for index calculation.
The Nasdaq100 is more complicated. SpaceX's 5% would be counted as about 25% of their total market cap for indexing.
I don't get it. He owns some of the companies out right and has no problem securing financing. Who is he screwing over?
> First they only release 5% to 10% to create an artificially inflated price. Its called the low float strategy...
Why would you float more than you reasonably would need. What's the upside of saying "we're worth X" due to a low float? Doesn't really buy you anything. And financiers are not stupid. Much the same way you can't create a shitcoin, sell one share to your buddy and convince a bank to lend you based on the "full" market cap
> the Nasdaq 100 inclusion is supposed to be earned. You list, trade for up to a year at least, prove you are stable and then maybe you might be selected for inclusion
Not really. Nasdaq and all indexes are supposed to serve as an index of largest companies in the country. It's not a prize that you have to "earn". Not including this company would be activism and against their mission.
> But Musk told Nasdaq "fast-track me or I list on NYSE... so the Nasdaq invented a "Fast Entry" rule out of thin air..
Yeah, it's called competition. You have a choice of where to list. This is how a healthy competitive environment works. Again, who is being harmed? Why is there a "Slow Entry"? No justification for bureaucratic hoop jumping.
> Why does this matter? The second SpaceX hits these indexes, every passive fund is forced to buy, your 401k, your Vanguard fund, your target date fund. All buying SpaceX at whatever inflated price it opens at, with zero public track record. Nobody asks you.
You found a cheat code! Create a company that's generating ~15b in revenue, has a >50% profit margin and ~50% revenue annual growth rate. Now you get to list your stock publicly, let the exchanges compete for your listing considering very few public large companies grow anywhere close to that, and force large indexes to buy you because, by this point you created one of the most valuable companies in the world!
Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$.
You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company.
You then rotate out a company for a new one. The index is still 100 G$, but to match the index you are contractually required to sell your 20% ownership of the old company and are contractually required to buy 20% ownership of the new company.
However, the newly added company only released 5% of its shares to the public and the founder kept hold of the remaining 95%. Those fund managers are contractually obligated to buy 20% of the newly added company, but only 5% is available. Like a short squeeze, where the squeezer buys and holds supply so there are not enough purchasable shares to cover the shorts (obligated ownership), this is a financial divide by zero.
To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want.
That is the scheme described: how to short squeeze pensions who do not even have shorts for fun and profit.
It seems the S&P 500 indices only take the free-float shares into account when calculating weights:
S&P DJI’s market cap-weighted indices are float-adjusted – the number of shares outstanding is reduced to exclude closely held shares from the index calculation because such shares are not available to investors.
page 6 of https://www.spglobal.com/spdji/en/documents/methodologies/me...
I think the xAI acquisition was a big tell though. How could a brand new, mostly irrelevant AI platform suddenly be worth over a hundred billion? No one can believe that xAI is somehow worth even a third of what Anthropic is worth, let alone most of what Anthropic is worth.
People put up with various other misleading claims or exaggerations. Battery tech. Roadster. FSD. But now the scheme of lying and manipulating things is so obvious. Not just with xAI but also the subscription switch for FSD. And the absurd push for space based datacenters. And the corruption involved in DOGE, as well as pushing to quickly secure FAA approval for 1 million satellites before this administration is kicked out of power at the midterms.
It’s clear this is one big scam, and unfortunately it may end up working. If they end up getting enough capital raised in an IPO, they may be able to use that capital to mostly catch up on the claims Musk has made.
At 25:48 you have the explanation for the (multiple) tricks: https://youtu.be/8rS3fTbC7TE?t=1548
This Musk guy makes Ponzi look like the Pope.You almost have to admire it the way you admire a raccoon breaking into a triple locked trash can at 2 AM. You are furious. You know you should be furious. But part of you is at the window wondering "how did he do that?". As you will see below, this raccoon is getting the trash can manufacturer to remove the lock for him first.
This is how retail investors are about to get played by the SpaceX IPO:
First they only release 5% to 10% to create an artificially inflated price. Its called the low float strategy...
Also...the Nasdaq 100 inclusion is supposed to be earned. You list, trade for up to a year at least, prove you are stable and then maybe you might be selected for inclusion. That rule protects the millions of people whose retirement money is in index funds.
But Musk told Nasdaq "fast-track me or I list on NYSE... so the Nasdaq invented a "Fast Entry" rule out of thin air....15 trading days and you are in. They openly admitted it was designed for SpaceX. S&P is now considering the same thing for the S&P 500, which has around $24 trillion in assets tracking it.
Why does this matter? The second SpaceX hits these indexes, every passive fund is forced to buy, your 401k, your Vanguard fund, your target date fund. All buying SpaceX at whatever inflated price it opens at, with zero public track record. Nobody asks you.
With the index inclusion and the implication of massive institutional liquidity you have a clean exit for the insiders. After lockup expires, Musk and early investors dump the artificiality rarefied shares (it seems only 5% to 10%) into a pool of demand that was artificially created by forced passive buying.
Your retirement money is their exit liquidity. Madoff went to prison for funneling new investor money to pay old investors. This is funneling passive investor money to inflate the price so insiders can cash out.And the exchange itself is rewriting the rules to make it happen.
The saving grace of the SP500 and most similar indexes is that they are cap-weighted. So if SpaceX only, floats 5% only that 5% of their capitalization counts for index calculation.
The Nasdaq100 is more complicated. SpaceX's 5% would be counted as about 25% of their total market cap for indexing.
I would think Fidelity, Vanguard et al are going to eat Musk for lunch.
It’ll take a decade.
Thanks for that. The trajectory of this timeline is beyond disheartening.
> This Musk guy makes Ponzi look like the Pope
I don't get it. He owns some of the companies out right and has no problem securing financing. Who is he screwing over?
> First they only release 5% to 10% to create an artificially inflated price. Its called the low float strategy...
Why would you float more than you reasonably would need. What's the upside of saying "we're worth X" due to a low float? Doesn't really buy you anything. And financiers are not stupid. Much the same way you can't create a shitcoin, sell one share to your buddy and convince a bank to lend you based on the "full" market cap
> the Nasdaq 100 inclusion is supposed to be earned. You list, trade for up to a year at least, prove you are stable and then maybe you might be selected for inclusion
Not really. Nasdaq and all indexes are supposed to serve as an index of largest companies in the country. It's not a prize that you have to "earn". Not including this company would be activism and against their mission.
> But Musk told Nasdaq "fast-track me or I list on NYSE... so the Nasdaq invented a "Fast Entry" rule out of thin air..
Yeah, it's called competition. You have a choice of where to list. This is how a healthy competitive environment works. Again, who is being harmed? Why is there a "Slow Entry"? No justification for bureaucratic hoop jumping.
> Why does this matter? The second SpaceX hits these indexes, every passive fund is forced to buy, your 401k, your Vanguard fund, your target date fund. All buying SpaceX at whatever inflated price it opens at, with zero public track record. Nobody asks you.
You found a cheat code! Create a company that's generating ~15b in revenue, has a >50% profit margin and ~50% revenue annual growth rate. Now you get to list your stock publicly, let the exchanges compete for your listing considering very few public large companies grow anywhere close to that, and force large indexes to buy you because, by this point you created one of the most valuable companies in the world!
All of that could be true, but since there has been no SpaceX IPO, it seems a bit early for outrage.
What scandal? Inflating share prices is standard fare.