Good. Indexes are supposed to be slow-moving, precisely due to their entry requirement of sustained profitability that skews towards mature companies.
All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
SpaceX and OAI stock will be available through Robinhood, Questrade and all the other retail investor markets. Individuals can make an informed choice to trade it there, rather than have it automatically added to their index fund without having any say.
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
Carvana is the poster child for this. It's astonishing that a company with a history of shady practices, and that has yet to offer a convincing explanation for why it is not a scam, is part of the S&P 500.
It’s important to note that index funds will eventually get in, so it’s not like 401k will never be holding these stocks. It would be silly to assume that the stock is going to tank that much on day 1, on the asumption that there are not enough investors to buy the big three IPOs that are coming out this year. There is plenty of money in the market, and everyone knows index funds will buy these stocks when the companies get in, so everyone will be able to dump them if needed in a year or so.
Btw I don’t really know how index funds work, but if they need to track the index as closely as possible, they will all have to buy those stocks on a certain day, no? There will be a crazy price hike when they do so. Or maybe they have terms that let them smoothen their trading around entry and exit?
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
The purpose of an index is to provide a benchmark of the market, not to build funds that follow the index.
On a fundamental level, the S&P 500 index is meant to be a benchmark of the market. Journalists, policymakers, investment managers, politicians, regular investors, everyone I know all use the S&P 500 as the benchmark of the US stock market.
If a significant percentage of the market is excluded from the index because they don't meet index inclusion criteria, then then index stops being a useful benchmark.
S&P500 is not a total market index. It tracks a specific kind of large firm, with certain filters.
Fast tracking means that the market likely wont have enough time to find the settled price (especially with the knowledge that passive funds are about to buy), and including a mispriced thing does not necessarily make the benchmark more accurate.
> If a significant percentage of the market is excluded from the index because they don't meet index inclusion criteria, then then index stops being a useful benchmark.
So what's the reason for fast entry specifically? If it's a significant portion of the market and will remain so, it doesn't need an accelerated entry. A benchmark should be conservative about new entrants so that it doesn't turn from a market benchmark to a trend/fad benchmark.
If time validates the valuations the entry will come in time, just like for previous entries.
Because the index needs accuracy. If a company is 1-2% of the total US market cap and not included in the index, then the index is wrong right now. The longer this company is not in the index, the longer this error compounds.
In the coming few months, multiple giga-cap companies (SpaceX, OpenAI, Anthropic) are all planning to IPO. These companies will likely never meet S&P profitability inclusion criteria for the next 5 years. These are not bad companies, but because the S&P inclusion criteria were written for old GAAP profitable companies, and not high-growth companies that invest their cashflow into company growth over profits. Excluding some of the most civilization changing companies from the benchmark means the benchmark is doing a terrible job.
There are indexes which explicitly try to capture the entire market- the Russell 3000 is most prominent, but the Wiltshire 5000 is another one, and Vanguard's Total Market Funds and ETF follow the CRSP US Total Market Index. I believe all of them plan to include SpaceX/OpenAI etc. within a few weeks of its listing, which is what I'd expect from their goal of tracking the total market. Other indexes follow just a few stocks- most famously, the Dow Jones Industrial Average (built during an era of when it had to be calculated by hand every night) looks at just 30 stocks in a weird way(1).
The S&P 500 isn't either of those. It has a list of criteria for inclusion, one of which is profitability. They are sticking with that criteria. If you don't like it, sell your VOO and buy VTI instead.
1: It is essentially impossible to build an index that tracks the DJIA because, since it was done on pencil and paper, it isn't actually market-cap weighted, but is share price weighted, with a correction factor for each stock to account for splits, one stock replacing another, etc. Because of that nature, the weights of the DJIA change minute by minute, so someone attempting to track it would be subject to enormous error.
"Because the index needs accuracy.", and I would argue that include price accuracy not just inclusion accuracy. The S&P is a benchmark that is designed to reflect a subset of the market, and giving only some companies early access to the benchmark changes the benchmark. So if you want a benchmark that's designed to include all the big stocks regardless of age, profitability, etc then go make a new benchmark. The only thing you need to do is convince others to use your benchmark.
"go make a new benchmark" completely ignores how this works in practice. Benchmarks are only useful because everyone uses the same one, you can't swap it out. The S&P 500 benchmark is used as a comparison for trillions of dollars of mutual funds, index funds, and institutional mandates. The further the S&P 500 strays from reflecting the actual market, the more useless it becomes.
Also the S&P criteria have been revised multiple times, it's not some sacred unchangeable document.
It may be used as a benchmark, but that’s not actually the purpose of it. The purpose is to serve as a way for people to invest in a representative sample of the market. It can still be a representative sample with safeguards. If you want a benchmark without safeguards, you can calculate one without risking millions of people’s life savings.
You have your history backwards. The S&P 500 was created in 1957 as a benchmark. The first investable index fund tracking it (Vanguard's) wasn't created created until 1976. Vanguard created their fund to track the benchmark, not the other way around.
And if you need a second, different index to function as the true market benchmark because the S&P 500 no longer reflects the actual market, then you just agreed the S&P 500 is no longer an adequate benchmark. You just agreed with my point.
Because it's selective, the S&P by definition does not reflect the actual market. It reflects a subset of it.
If you're comfortable with this notion of what the S&P does, then you ought to be comfortable with S&P applying the same methodology they've always used. There are other indexes you can reference if this particular sampling of the market isn't to your personal liking.
It’s a benchmark of the market under certain rules, like having multiple quarters of earnings for the market to value them at.
These companies want special exceptions. If you are an exception why should you be included in a benchmark? At best they should have an asterisk against their name like Sammy Sosa or Mark McGuire if they are not following the same rules.
Your baseball cheating analogy makes no sense here. Rules against corked bats / steroids exist so people don't cheat at a sport and all players can compete equally. S&P rules are supposed to make the index reflect the market. Totally different.
The profitability requirement is something made up by the S&P committee. If that rule ends up excluding trillions in market cap, the rule has defeated its own purpose. The 12 months of profitability requirement punishes high-growth companies that invest their FCF into growing the business vs taking profits.
It excludes companies like Amazon, which when ran by Bezos, was famously unprofitable and invested all free cash flow into growing the business and never turned a significant profit until >20 years after its founding.
> Rules against corked bats / steroids exist so people don't cheat at a sport and all players can compete equally.
> The profitability requirement is something made up by the S&P committee.
Those are both equally made up. In this case the rules are being changed for new entrants into the market such as SpaceX for the Nasdaq and other benchmarks that are allowing it for that none of the previous companies in said index were allowed to get in under.
And since it’s 15 days and I know most companies have lockout terms on the order of months for various levels of stock, I’m hesitant to believe this won’t modify the benchmarks beyond what has happened with previous inclusions.
`JumpCrisscross’s reply to one of my other comments on this thread in regards to the S&P being a committee based decision actually has had me pause to think, but your argument that the rules are arbitrary so it can’t be cheating like my baseball analogy fails to land.
Baseball rules exist to prevent cheating. The S&P rules exist so the index can accurately reflect the market. When S&P rules end up excluding a significant part of the market with trillions in real market cap, that means the rules are badly designed and broken by its own standard. You're trying to compare updating badly written S&P 500 rules to cheating, which makes no sense at all. They are completely different.
And calling out the rules are being changed for new entrants into the market such as SpaceX on Nasdaq proves my point. Index providers are already quietly admitting their criteria are too rigid.
Even S&P adjusted their rules to allow SpaceX into the index, although only for the total market index.
"The S&P rules exist so the index can accurately reflect the market", the rules exist to reflect a subset of the market, and the committee chooses that subset. It's their subset so they get to set the rules, you don't have to use it if you don't want to. If you don't like that subset then create your own index. Then you just need to convince others to use it.
This seems a sensible thing to do. If you change the rules on how things end up on your index, you force everyone using that index to reevaluate it. Your index is now perceived as more volatile (and probably is), and all the finance people need to reevaluate the risk of their index funds and decide if it is now 'growth', 'high growth' or whatever bucket it belongs in based on the new risk profile. And then all the portfolios need to be rebalanced. Which all takes time, more time than was being proposed. The sensible thing to do is to create a new index with the new rules.
> sensible thing to do is to create a new index with the new rules
It depends. Indices aren’t funds. They aren’t meant to balance investor interests. They’re meant to communicate some metric about the market.
The S&P tells you how big companies are doing in an index optimized to balance representation against trading cost. So in 2005, float was taken into account for weighting (versus just market cap). This made sense. Also, since the start, the S&P 500 has been a committee-based index. Not rule based. This has made it successful; if you want stable and unchanging, you never went for the S&P 500.
The S&P 500 may not be a fund itself, but Standard & Poor's is a business whose ability to sell services is correlated with the continued relevance of the S&P 500. It absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis.
It seems entirely reasonable to say: "if we make a certain decision, we correlate both our reputation and a nontrivial portion of the U.S. economy with the whims of one of the most volatile personalities in industry, and we should likely pay attention to this trial balloon that shows such anticipatory fear of the decision that we might lose our reputation as an index altogether."
> absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis
As a business, sure. As a committee, it’s still a deeply technical process. I can say with a lot of confidence that optics weren’t considered in any of this, possibly to a fault.
> and a nontrivial portion of the U.S. economy
This vastly overstates the amount of assets tied to the S&P 500. It’s a lot. But it’s a strong minority of equity exposures.
I know folks who have been on these. They don’t have tenure. But they’re basically emeritus. If S&P wanted to do something that would cause chaos, it would be fucking with those folks because they made a decision that looks bad.
It’s a public benchmark fund that has much of its value based on its decisions being publicly stable and publicly consistent.
Who would want to invest in a benchmark fund with arcane(the literal term as opposed to mundane) rules that were privately decided? If your statement is accurate it sounds like moving out of such a fund would be prudent. I feel like it’s not accurate since they are sticking to their guns and not changing the rules to benefit oligarchs like Musk such as Nasdaq is doing.
> Who would want to invest in a benchmark fund with arcane(the literal term as opposed to mundane) rules that were privately decided?
There are lots of rules-based funds. S&P is transparently committee based. It’s why dual-class new entrants are banned, but Google and Berkshire are grandfathered in.
There is a genuine debate on rules versus committees in the index world. But S&P has stuck to its guns as a bastion of the latter. And it works. Everyone picking the S&P 500 over its competitors chooses that.
> Everyone picking the S&P 500 over its competitors chooses that.
I'm fairly confident most people deciding to allocate to s&p trackers have no idea about rules-based vs committee-based governance. They just pick the default. And that default can quickly change if the S&P starts making weird/unpopular decisions in a highly publicized situation.
There's overlap between strong minority and nontrivial, so not sure how it can be vastly overstated. Do you have numbers you can add to this, or any explanation of equity exposure etc?
The market cap of the S&P 500 according to Google is ~$65T. Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia. That's a big deal.
The rules around index inclusion exist for a reason. Too much control in one person's hands (which SpaceX has), too small a float (so you don't get price discovery), lack of a history of financial performance and minimal trading days just don't give investors confidence and, like it or not, investment decisions are made based on the index. If you want to argue against passive investment, well, good luck with that.
I think a lot of people have this weird idea that what we need is some theoretically unfettered market for "true" price discovery when it's actually regulations like this that create markets. It's like a libertarian brain worm.
I don't think anybody wants these mega-companies out of the index, specifically. They just don't see why rules that exist for a reason should be suspended when the net effect of that is that investors have less information and there is a lot of forced purchasing. If you have confidence in your IPO, let the market decide what it's worth without trying to fix the price because what they seem to want is for insider lock-ups to end about the time we'd otherwise be getting normal price discovery. Kinda weird.
Investor confidence needfs to be managed by creating a stable, regulated market.
> Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia.
This is a common misconception. The S&P 500 weights allocation by float-adjusted market cap, not by total market cap. In the case of SpaceX, they are planning to float ~4% of shares at IPO. Even if SpaceX was added to the index, its index weight would be based on that tiny float, and at a $1.75T valuation it would be treated as roughly a $70 billion company.
SpaceX weight would be ~0.125% of the index, not ~2.5% as you imply.
Before the changes, the Nasdaq-100 index was total market cap-weighted not float-weighted. Once a company crossed 10% floated shares, the company was added to the index at full weight.
Nasdaq's new system is a hybrid of float-weighted and cap-weighted. If a company has below 33.3% float, its weighting is 3x float. Above that, it's cap weighted. This allows a gradual fade-in of the company into the index.
It's a better system than the previous one, and in Nasdaq's own words, more conservative.
For the Nasdaq-100, SpaceX at 4% float gets 3 x 4% = 12% of its market cap counted, which is $210B not $1.75T. Still <1% of the index.
Also, the multiplier is 3x, not 5x. Nasdaq proposed 5x, but after feedback, this was reduced to 3x. The new thresholds are 3x and 33%, not 5x and 20%.
Price discovery isn’t “making up” a number it’s discovering a number that meets a specific criteria.
Critically it’s not simply averaging a bunch of made up numbers. I may think gold is worth 1,000$/kg but if nobody is willing to sell me gold at that price then my “made up” number has zero effect on the market price.
The 409a has a lot of words and numbers to justify a particular valuation. It's not made up from the ether based on nothing. You can disagree with their reasoning and come to a different number, but you need to show your work if you want anyone to give a shit about your made up number. How many satellites have you launched this year? What's the going rate for a kilogram to LEO? Who are the competitors and what do they charge? Things like that which aren't magic made up numbers.
They have to be rebalanced every quarter regardless. And I'm not sure how many people would actually sell due to the inclusion of a single company. They're very loud about it, but no evidence that this is causing a significant amount of selling.
At a fundamental level, an index is supposed to reflect the market. If the current market is IPO-ing unprofitable companies at absurd multipliers, the index should reflect that. Because that is the market.
The longer major indexes exclude these companies, the further the index strays from representing the market, and the worse they do their core job of tracking it.
It's not the index's fault that market is pushing out overpriced and unprofitable companies.
Indices are supposed to reflect a part of the market. That's why you have all of S&P500, the Dow, NYSE Composite, and Nasdaq Composite (and several others) in the US — They each reflect different attributes of the market as a whole.
As it stands, it's clear that the users of S&P500 are not interested in the performance of the parts of the market made up of overpriced (and potentially highly volatile) IPOs.
The problem with your framing of "users of S&P500 are not interested overpriced IPOs" is that it conflates two fundamentally different things: what an index describes vs what investors prefer. The moment you start filtering out parts of the market based on investor appetite vs market reality, you stop building an index and instead start creating an actively managed product. That's active investing. It's no longer an index.
The S&P 500 is used as the benchmark of the market by practically everyone. Journalists, policymakers, investment managers, politicians, regular investors, everyone I know. If the benchmark that everyone uses as a market proxy is systematically excluding a substantial part of the market, then the gap betweeen "the index" and "the market" has real consequences.
You can't have it both ways: Either the S&P 500 is a market proxy, in which excluding parts of the market is a problem; or it's a curated slice, in which everyone needs to stop it as the default benchmarket for the market.
An index is an index. It works fine as an index if it excludes one or two stocks. People seem to forget as well that this is a question of waiting a single year before it including the stock. It is literally just long enough to make sure the price settles, it's not some catastrophic thing.
It's more than that. None of SpaceX, OpenAI, nor Anthropic will meet the criteria, and they will make up a significant part of the US stock market. Each of these companies is heavily investing their cashflow into growing the company and are unlikely to be profitable many years.
The inclusion criteria prioritizes companies that extract their cashflow into profit, and excludes companies that invest their cashflow into growing the company. For example, when Jeff Bezos ran Amazon he described his company as "famously unprofitable, And that is a conscious strategy and an investment decision." Amazon only joined the index in 2005, nearly 8 years after IPO, even though it was a significant member of the stock market at the time.
"The inclusion criteria prioritizes companies that extract their cashflow into profit", in almost all cases, yes. But if you want to buy into these newer stocks there are various high growth indices you can buy, no one is stopping you. If you want to buy into only one or two of those stocks then you can. It's a free market for stocks and it's a free market for indices. There's no regulation that says the S&P has to include certain stocks.
I feel like a lot of people discussing here have no clue what they're talking about, they just have an opinion - which, combining both, most likely means it's an opinion they did not form themselves.
The rules for index inclusion absolutely make sense in many ways.
What a pleasant surprise. I was positive S&P would get strongarmed into the bamboozle like Nasdaq but it seems they have a bit more integrity. Good for them.
Nasdaq changed its rules recently so SpaceX can join the Nasdaq 100 Index, a cohort of the largest non-financial companies listed on its exchange, in just 15 trading days, down from a three-month minimum. FTSE Russell adopted a similar approach, shortening the waiting time to five trading days.
The market is more unpredictable than it’s been in a long, long time so I hesitate to make a firm prediction but to me the odds that SpaceX will be a successful IPO over a 3-6 month window are significantly lower now. S&P inclusion basically requires funds to hold a position by default, and per their own estimates $20tn of assets are indexed/benchmarked to the S&P.
Not OP but I will weigh in. The numbers for SpaceX were not looking great, they are burning cash faster than Starship crashing into the Indian ocean. The idea was that with a fast indexing, this would be mostly irrelevant as retirement funds would automatically buy into the IPO after 15 days thus bolstering the company before any sanity would prevail on the markets.
Now that they have to wait a year for that point, that cash burn is going to work against them fairly heavily. There is also something like $20 billion of debt they have to pay back in the next 12 months that might not be covered over so easily now.
That said, SpaceX and a lot of Elons companies have had figures that look terrible for ages, and yet they keep manage to pull rabbits out of the hat. So who knows. Maybe they sell a bunch of assets, they have more than enough to cover the gap.
Depends what you mean by successful. If you mean "the IPO goes ahead" then I don't think this makes a difference (unless Elon cracks the shits at this decision and pulls out, which I'm not sure is an option).
If "successful" equates to number-go-up, then my understanding is that Fast Index Entry would have resulted in, effectively, forced purchase of shares by various funds.
When Fast Index Entry (FIE) was a chance of being introduced, the odds of number go up were higher. Now that FIE has been ruled out, there's a lower chance of number go up because there's no "forced blind purchase" group.
Nothing that you are saying here has any commitment to what to expect, is all heresay. It's 100% ad hominem, to the person. That's a fault whether the direction is complimentary or derogatory. I personally really don't want to see vacuous empty comments like this.
No, I'm saying they are hyping up some random podcast while saying sweet nothings. I really don't like empty hype. I want some actual content to posts that actually says something, not just links breathlessly encouraging me to go spend an hour listening.
The middle one is the ad-hominem puffery. The rest isn't quite exactly 100% 'of the person's, but still doesn't give me any actual leads into what the content is: its just empty puffery.
I wasn't familiar with the Center for Research in Security Prices (CRSP). Apparently they were acquired by Morningstar in February 2026. I also found this press release from Vanguard announcing they will be updating fund names (including VTI) to reflect the acquisition
https://corporate.vanguard.com/content/corporatesite/us/en/c... but nothing on the fund composition or rule changes.
Those mega IPOs are the latest grift to unload overpriced shares before the whole AI tulip bubble explodes in everyone's face.
The insiders know it, which is precisely why those IPOs are happening right now. Employees and VCs don't want to be holding the bag. small-time investors will be.
Also, SpaceX is going to unlock more and more on their float at around the same time most indexes will have to buy it. It has been engineered to socialize the losses.
I'm happy SP didn't agree to fast track any of those, unlike VTI and Nasdaq100.
I spent the weekend to rebalance all my retirement accounts to make sure none of them are going to fast track those grifty IPOs. Unfortunately, I cannot do that for my taxable accounts as it would generate a tax-event.
They are happening now because the entire space narrative is dependent on SDI, sorry Golden Dome, as a massive heist of taxpayer money for the militarization of space (nobody believes in economic civilian space compute). Like SDI it’s bullshit but like SDI it works at robbing everyone blind.
Think of it like security backed bonds, if you bundle a lot of dud businesses into a single business that is doing ok then as an aggregate it looks fine. So bundling Twitter and xAi into SpaceX covers up that. This is why I suspect they will eventually merge Tesla into SpaceX as it is on the decline now.
The problem is that with the current cash on hand and large loans coming due, they only have a 6 month runway. Thus the IPO to get other peoples money to hopefully fund themselves until solvent.
All IPO's are essentially that, people invest in your business, the business uses their money to achieve more, and if it all works out then future profits can eventually be paid back to investors.
> people invest in your business, the business uses their money to achieve more
that was what normally would happen. However, in the last few decades of IPO, it's become common to have two classes of shares - one being the controlling shares that founders hold on to (with 10x the voting rights), and a 2nd class of ordinary (common!) shares with 1x vote per share.
This means the founders (and early investors perhaps) don't give up any controlling stake of a company at all when the IPO while only selling common shares. Doing this means they get to control the company's operations and financial moves, without shareholder oversight, but obtain all of the shareholder investment cash.
You could argue this can lead to better management, as the founders are more likely to care about the company than professional managers that typically would be hired to manage a public company. I say that is only an argument of luck of the draw, rather than a good argument against the above share and voting right splitting.
Look at facebook/meta - would that company be as invested in things like the metaverse, etc, if zuckerberg weren't in a controlling position?
That already happened with the merger of X with XAI and then the merger of Xai and SpaceX.
But the reason is because SpaceX is trying to tool up for orbital datacenters. They're building a bunch of solar cell manufacturing plants and Starship launch pads.
Orbital datacenters is just an excuse of a reason to merge the two companies when there’s nothing else tying them together. They won’t actually happen.
Good. Indexes are supposed to be slow-moving, precisely due to their entry requirement of sustained profitability that skews towards mature companies.
All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
SpaceX and OAI stock will be available through Robinhood, Questrade and all the other retail investor markets. Individuals can make an informed choice to trade it there, rather than have it automatically added to their index fund without having any say.
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
Carvana is the poster child for this. It's astonishing that a company with a history of shady practices, and that has yet to offer a convincing explanation for why it is not a scam, is part of the S&P 500.
Ah, so you'd like the passive broad market index which contains the 500 biggest good companies?
what's the argument for it being a scam?
shady debt offloading onto its sibling financing entity, which is run by Carvana CEO's father, a man convicted of fraud
> a man convicted of fraud
Most practitioners in the field see that as a very strong signal of future fraud.
It’s important to note that index funds will eventually get in, so it’s not like 401k will never be holding these stocks. It would be silly to assume that the stock is going to tank that much on day 1, on the asumption that there are not enough investors to buy the big three IPOs that are coming out this year. There is plenty of money in the market, and everyone knows index funds will buy these stocks when the companies get in, so everyone will be able to dump them if needed in a year or so.
Btw I don’t really know how index funds work, but if they need to track the index as closely as possible, they will all have to buy those stocks on a certain day, no? There will be a crazy price hike when they do so. Or maybe they have terms that let them smoothen their trading around entry and exit?
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
The purpose of an index is to provide a benchmark of the market, not to build funds that follow the index.
On a fundamental level, the S&P 500 index is meant to be a benchmark of the market. Journalists, policymakers, investment managers, politicians, regular investors, everyone I know all use the S&P 500 as the benchmark of the US stock market.
If a significant percentage of the market is excluded from the index because they don't meet index inclusion criteria, then then index stops being a useful benchmark.
S&P500 is not a total market index. It tracks a specific kind of large firm, with certain filters.
Fast tracking means that the market likely wont have enough time to find the settled price (especially with the knowledge that passive funds are about to buy), and including a mispriced thing does not necessarily make the benchmark more accurate.
> If a significant percentage of the market is excluded from the index because they don't meet index inclusion criteria, then then index stops being a useful benchmark.
So what's the reason for fast entry specifically? If it's a significant portion of the market and will remain so, it doesn't need an accelerated entry. A benchmark should be conservative about new entrants so that it doesn't turn from a market benchmark to a trend/fad benchmark.
If time validates the valuations the entry will come in time, just like for previous entries.
Because the index needs accuracy. If a company is 1-2% of the total US market cap and not included in the index, then the index is wrong right now. The longer this company is not in the index, the longer this error compounds.
In the coming few months, multiple giga-cap companies (SpaceX, OpenAI, Anthropic) are all planning to IPO. These companies will likely never meet S&P profitability inclusion criteria for the next 5 years. These are not bad companies, but because the S&P inclusion criteria were written for old GAAP profitable companies, and not high-growth companies that invest their cashflow into company growth over profits. Excluding some of the most civilization changing companies from the benchmark means the benchmark is doing a terrible job.
There are indexes which explicitly try to capture the entire market- the Russell 3000 is most prominent, but the Wiltshire 5000 is another one, and Vanguard's Total Market Funds and ETF follow the CRSP US Total Market Index. I believe all of them plan to include SpaceX/OpenAI etc. within a few weeks of its listing, which is what I'd expect from their goal of tracking the total market. Other indexes follow just a few stocks- most famously, the Dow Jones Industrial Average (built during an era of when it had to be calculated by hand every night) looks at just 30 stocks in a weird way(1).
The S&P 500 isn't either of those. It has a list of criteria for inclusion, one of which is profitability. They are sticking with that criteria. If you don't like it, sell your VOO and buy VTI instead.
1: It is essentially impossible to build an index that tracks the DJIA because, since it was done on pencil and paper, it isn't actually market-cap weighted, but is share price weighted, with a correction factor for each stock to account for splits, one stock replacing another, etc. Because of that nature, the weights of the DJIA change minute by minute, so someone attempting to track it would be subject to enormous error.
"Because the index needs accuracy.", and I would argue that include price accuracy not just inclusion accuracy. The S&P is a benchmark that is designed to reflect a subset of the market, and giving only some companies early access to the benchmark changes the benchmark. So if you want a benchmark that's designed to include all the big stocks regardless of age, profitability, etc then go make a new benchmark. The only thing you need to do is convince others to use your benchmark.
"go make a new benchmark" completely ignores how this works in practice. Benchmarks are only useful because everyone uses the same one, you can't swap it out. The S&P 500 benchmark is used as a comparison for trillions of dollars of mutual funds, index funds, and institutional mandates. The further the S&P 500 strays from reflecting the actual market, the more useless it becomes.
Also the S&P criteria have been revised multiple times, it's not some sacred unchangeable document.
But it is not 1-2% of the total US market cap, is it?
It aspires to be that way. The market decides, and it hasn’t decided yet.
Am I missing something?
> Because the index needs accuracy.
No, it doesn't. At least, not the way you are probably defining it.
This sounds to me like you may be trying to use the index for something it's not really meant to be used for.
> If a company is 1-2% of the total US market cap
Over what time horizon should that number be computed? Every day? Every second? Every month/quarter?
It is not as simple as it seems.
It may be used as a benchmark, but that’s not actually the purpose of it. The purpose is to serve as a way for people to invest in a representative sample of the market. It can still be a representative sample with safeguards. If you want a benchmark without safeguards, you can calculate one without risking millions of people’s life savings.
You have your history backwards. The S&P 500 was created in 1957 as a benchmark. The first investable index fund tracking it (Vanguard's) wasn't created created until 1976. Vanguard created their fund to track the benchmark, not the other way around.
And if you need a second, different index to function as the true market benchmark because the S&P 500 no longer reflects the actual market, then you just agreed the S&P 500 is no longer an adequate benchmark. You just agreed with my point.
Because it's selective, the S&P by definition does not reflect the actual market. It reflects a subset of it.
If you're comfortable with this notion of what the S&P does, then you ought to be comfortable with S&P applying the same methodology they've always used. There are other indexes you can reference if this particular sampling of the market isn't to your personal liking.
It’s a benchmark of the market under certain rules, like having multiple quarters of earnings for the market to value them at.
These companies want special exceptions. If you are an exception why should you be included in a benchmark? At best they should have an asterisk against their name like Sammy Sosa or Mark McGuire if they are not following the same rules.
Your baseball cheating analogy makes no sense here. Rules against corked bats / steroids exist so people don't cheat at a sport and all players can compete equally. S&P rules are supposed to make the index reflect the market. Totally different.
The profitability requirement is something made up by the S&P committee. If that rule ends up excluding trillions in market cap, the rule has defeated its own purpose. The 12 months of profitability requirement punishes high-growth companies that invest their FCF into growing the business vs taking profits.
It excludes companies like Amazon, which when ran by Bezos, was famously unprofitable and invested all free cash flow into growing the business and never turned a significant profit until >20 years after its founding.
> S&P rules are supposed to make the index reflect the market.
Where did you find that? Link?
I ask because common understanding is that the index is a stable tracker of the market, specifically to exclude volatility.
IOW, it reflects a smoothed market, not a point-in-time-with-daily-granularity market. I would really like to know where you read what you read.
What is it a benchmark for? All investable public stocks or the economy writ large?
> Rules against corked bats / steroids exist so people don't cheat at a sport and all players can compete equally.
> The profitability requirement is something made up by the S&P committee.
Those are both equally made up. In this case the rules are being changed for new entrants into the market such as SpaceX for the Nasdaq and other benchmarks that are allowing it for that none of the previous companies in said index were allowed to get in under.
And since it’s 15 days and I know most companies have lockout terms on the order of months for various levels of stock, I’m hesitant to believe this won’t modify the benchmarks beyond what has happened with previous inclusions.
`JumpCrisscross’s reply to one of my other comments on this thread in regards to the S&P being a committee based decision actually has had me pause to think, but your argument that the rules are arbitrary so it can’t be cheating like my baseball analogy fails to land.
Baseball rules exist to prevent cheating. The S&P rules exist so the index can accurately reflect the market. When S&P rules end up excluding a significant part of the market with trillions in real market cap, that means the rules are badly designed and broken by its own standard. You're trying to compare updating badly written S&P 500 rules to cheating, which makes no sense at all. They are completely different.
And calling out the rules are being changed for new entrants into the market such as SpaceX on Nasdaq proves my point. Index providers are already quietly admitting their criteria are too rigid.
Even S&P adjusted their rules to allow SpaceX into the index, although only for the total market index.
https://press.spglobal.com/2026-06-04-S-P-Dow-Jones-Indices-...
"The S&P rules exist so the index can accurately reflect the market", the rules exist to reflect a subset of the market, and the committee chooses that subset. It's their subset so they get to set the rules, you don't have to use it if you don't want to. If you don't like that subset then create your own index. Then you just need to convince others to use it.
This seems a sensible thing to do. If you change the rules on how things end up on your index, you force everyone using that index to reevaluate it. Your index is now perceived as more volatile (and probably is), and all the finance people need to reevaluate the risk of their index funds and decide if it is now 'growth', 'high growth' or whatever bucket it belongs in based on the new risk profile. And then all the portfolios need to be rebalanced. Which all takes time, more time than was being proposed. The sensible thing to do is to create a new index with the new rules.
> sensible thing to do is to create a new index with the new rules
It depends. Indices aren’t funds. They aren’t meant to balance investor interests. They’re meant to communicate some metric about the market.
The S&P tells you how big companies are doing in an index optimized to balance representation against trading cost. So in 2005, float was taken into account for weighting (versus just market cap). This made sense. Also, since the start, the S&P 500 has been a committee-based index. Not rule based. This has made it successful; if you want stable and unchanging, you never went for the S&P 500.
The S&P 500 may not be a fund itself, but Standard & Poor's is a business whose ability to sell services is correlated with the continued relevance of the S&P 500. It absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis.
It seems entirely reasonable to say: "if we make a certain decision, we correlate both our reputation and a nontrivial portion of the U.S. economy with the whims of one of the most volatile personalities in industry, and we should likely pay attention to this trial balloon that shows such anticipatory fear of the decision that we might lose our reputation as an index altogether."
> absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis
As a business, sure. As a committee, it’s still a deeply technical process. I can say with a lot of confidence that optics weren’t considered in any of this, possibly to a fault.
> and a nontrivial portion of the U.S. economy
This vastly overstates the amount of assets tied to the S&P 500. It’s a lot. But it’s a strong minority of equity exposures.
> I can say with a lot of confidence that optics weren’t considered in any of this, possibly to a fault.
How can you possibly know that? Do the people on that committee have a cast-iron tenure guarantee?
> How can you possibly know that?
I know folks who have been on these. They don’t have tenure. But they’re basically emeritus. If S&P wanted to do something that would cause chaos, it would be fucking with those folks because they made a decision that looks bad.
It’s a public benchmark fund that has much of its value based on its decisions being publicly stable and publicly consistent.
Who would want to invest in a benchmark fund with arcane(the literal term as opposed to mundane) rules that were privately decided? If your statement is accurate it sounds like moving out of such a fund would be prudent. I feel like it’s not accurate since they are sticking to their guns and not changing the rules to benefit oligarchs like Musk such as Nasdaq is doing.
> Who would want to invest in a benchmark fund with arcane(the literal term as opposed to mundane) rules that were privately decided?
There are lots of rules-based funds. S&P is transparently committee based. It’s why dual-class new entrants are banned, but Google and Berkshire are grandfathered in.
There is a genuine debate on rules versus committees in the index world. But S&P has stuck to its guns as a bastion of the latter. And it works. Everyone picking the S&P 500 over its competitors chooses that.
> Everyone picking the S&P 500 over its competitors chooses that.
I'm fairly confident most people deciding to allocate to s&p trackers have no idea about rules-based vs committee-based governance. They just pick the default. And that default can quickly change if the S&P starts making weird/unpopular decisions in a highly publicized situation.
There's overlap between strong minority and nontrivial, so not sure how it can be vastly overstated. Do you have numbers you can add to this, or any explanation of equity exposure etc?
> They’re meant to communicate some metric about the market.
Is that why people spend time, money and effort creating and maintaining them? They're just broadcasters? That seems dubious.
> Is that why people spend time, money and effort creating and maintaining them? They're just broadcasters?
Yes. There are more indices than there are stocks. Publishing an index is, business wise, a game of getting funds to license them.
I mean, they get paid for it, sometimes quite a lot, for this "broadcasting". $100mm of AUM gets you like $200k profit/yr. (Like $500k minus fees)
an etf that tracks the S&P 500 is what then?
This is a big win for many S&P 500 etf holders
Exactly. The S&P 500 isn't a fund, but let's not pretend that inclusion in the index doesn't mean real money is at stake.
The market cap of the S&P 500 according to Google is ~$65T. Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia. That's a big deal.
The rules around index inclusion exist for a reason. Too much control in one person's hands (which SpaceX has), too small a float (so you don't get price discovery), lack of a history of financial performance and minimal trading days just don't give investors confidence and, like it or not, investment decisions are made based on the index. If you want to argue against passive investment, well, good luck with that.
I think a lot of people have this weird idea that what we need is some theoretically unfettered market for "true" price discovery when it's actually regulations like this that create markets. It's like a libertarian brain worm.
I don't think anybody wants these mega-companies out of the index, specifically. They just don't see why rules that exist for a reason should be suspended when the net effect of that is that investors have less information and there is a lot of forced purchasing. If you have confidence in your IPO, let the market decide what it's worth without trying to fix the price because what they seem to want is for insider lock-ups to end about the time we'd otherwise be getting normal price discovery. Kinda weird.
Investor confidence needfs to be managed by creating a stable, regulated market.
> Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia.
This is a common misconception. The S&P 500 weights allocation by float-adjusted market cap, not by total market cap. In the case of SpaceX, they are planning to float ~4% of shares at IPO. Even if SpaceX was added to the index, its index weight would be based on that tiny float, and at a $1.75T valuation it would be treated as roughly a $70 billion company.
SpaceX weight would be ~0.125% of the index, not ~2.5% as you imply.
SoaceX plans to continually unlock float for the first six months of being listed. So the percentage of the index would continue to rise.
Nasdaq "solved" that problem by including a 5x float multiplier for stocks with less than 20% of shares available to the public...
That's misleading.
Before the changes, the Nasdaq-100 index was total market cap-weighted not float-weighted. Once a company crossed 10% floated shares, the company was added to the index at full weight.
Nasdaq's new system is a hybrid of float-weighted and cap-weighted. If a company has below 33.3% float, its weighting is 3x float. Above that, it's cap weighted. This allows a gradual fade-in of the company into the index.
It's a better system than the previous one, and in Nasdaq's own words, more conservative.
For the Nasdaq-100, SpaceX at 4% float gets 3 x 4% = 12% of its market cap counted, which is $210B not $1.75T. Still <1% of the index.
Also, the multiplier is 3x, not 5x. Nasdaq proposed 5x, but after feedback, this was reduced to 3x. The new thresholds are 3x and 33%, not 5x and 20%.
https://www.nasdaq.com/newsroom/nasdaq100-index-methodology-...
I stand corrected, I was not aware of the full mechanism, and I was still stuck at the proposed multiplier and not the actual one.
except $4T is a made up number, a complete fantasy not rooted in any reality. it us more like $750bn (this is also made up number) :)
All valuations are “made up” numbers.
Some are more made up than others though!
Price discovery isn’t “making up” a number it’s discovering a number that meets a specific criteria.
Critically it’s not simply averaging a bunch of made up numbers. I may think gold is worth 1,000$/kg but if nobody is willing to sell me gold at that price then my “made up” number has zero effect on the market price.
The 409a has a lot of words and numbers to justify a particular valuation. It's not made up from the ether based on nothing. You can disagree with their reasoning and come to a different number, but you need to show your work if you want anyone to give a shit about your made up number. How many satellites have you launched this year? What's the going rate for a kilogram to LEO? Who are the competitors and what do they charge? Things like that which aren't magic made up numbers.
The valuation is actually mostly about AI. Satellites, like electric cars, don’t have quite the growth story (and I do mean “story”).
https://bsky.app/profile/patigallardo.bsky.social/post/3mnhc...
409As are absolutely made-up numbers. Management writes a number on a sheet and a 409A consultant signs it.
You do realize SpaceX valuation is completely detached from the space business at this point?
Their S1 cites (by memory) a 370B addressable market for space stuff and a 27 trillion for AI.
And for AI they counted all Twitter accounts as grok users.
The Spaces eXploration company was a cool company, but it's not what's being sold to the market now.
Oh come on. They absolutely have to target a valuation that's profitable for previous rounds, any reasoning is subservient to that imperative.
They have to be rebalanced every quarter regardless. And I'm not sure how many people would actually sell due to the inclusion of a single company. They're very loud about it, but no evidence that this is causing a significant amount of selling.
Because it hasn't happened yet, and now, won't.
So by that metric the very loud people succeeded: these new IPOs will enter the index under the established rules and time-frames.
At a fundamental level, an index is supposed to reflect the market. If the current market is IPO-ing unprofitable companies at absurd multipliers, the index should reflect that. Because that is the market.
The longer major indexes exclude these companies, the further the index strays from representing the market, and the worse they do their core job of tracking it.
It's not the index's fault that market is pushing out overpriced and unprofitable companies.
Indices are supposed to reflect a part of the market. That's why you have all of S&P500, the Dow, NYSE Composite, and Nasdaq Composite (and several others) in the US — They each reflect different attributes of the market as a whole.
As it stands, it's clear that the users of S&P500 are not interested in the performance of the parts of the market made up of overpriced (and potentially highly volatile) IPOs.
The problem with your framing of "users of S&P500 are not interested overpriced IPOs" is that it conflates two fundamentally different things: what an index describes vs what investors prefer. The moment you start filtering out parts of the market based on investor appetite vs market reality, you stop building an index and instead start creating an actively managed product. That's active investing. It's no longer an index.
The S&P 500 is used as the benchmark of the market by practically everyone. Journalists, policymakers, investment managers, politicians, regular investors, everyone I know. If the benchmark that everyone uses as a market proxy is systematically excluding a substantial part of the market, then the gap betweeen "the index" and "the market" has real consequences.
You can't have it both ways: Either the S&P 500 is a market proxy, in which excluding parts of the market is a problem; or it's a curated slice, in which everyone needs to stop it as the default benchmarket for the market.
An index is an index. It works fine as an index if it excludes one or two stocks. People seem to forget as well that this is a question of waiting a single year before it including the stock. It is literally just long enough to make sure the price settles, it's not some catastrophic thing.
> it excludes one or two stocks.
It's more than that. None of SpaceX, OpenAI, nor Anthropic will meet the criteria, and they will make up a significant part of the US stock market. Each of these companies is heavily investing their cashflow into growing the company and are unlikely to be profitable many years.
The inclusion criteria prioritizes companies that extract their cashflow into profit, and excludes companies that invest their cashflow into growing the company. For example, when Jeff Bezos ran Amazon he described his company as "famously unprofitable, And that is a conscious strategy and an investment decision." Amazon only joined the index in 2005, nearly 8 years after IPO, even though it was a significant member of the stock market at the time.
"The inclusion criteria prioritizes companies that extract their cashflow into profit", in almost all cases, yes. But if you want to buy into these newer stocks there are various high growth indices you can buy, no one is stopping you. If you want to buy into only one or two of those stocks then you can. It's a free market for stocks and it's a free market for indices. There's no regulation that says the S&P has to include certain stocks.
Why do index inclusion rules exist in the first place….?
Go do a google search
I feel like a lot of people discussing here have no clue what they're talking about, they just have an opinion - which, combining both, most likely means it's an opinion they did not form themselves.
The rules for index inclusion absolutely make sense in many ways.
What a pleasant surprise. I was positive S&P would get strongarmed into the bamboozle like Nasdaq but it seems they have a bit more integrity. Good for them.
Important to note:
Nasdaq changed its rules recently so SpaceX can join the Nasdaq 100 Index, a cohort of the largest non-financial companies listed on its exchange, in just 15 trading days, down from a three-month minimum. FTSE Russell adopted a similar approach, shortening the waiting time to five trading days.
The market is more unpredictable than it’s been in a long, long time so I hesitate to make a firm prediction but to me the odds that SpaceX will be a successful IPO over a 3-6 month window are significantly lower now. S&P inclusion basically requires funds to hold a position by default, and per their own estimates $20tn of assets are indexed/benchmarked to the S&P.
Not to say I have an opinion one way or another, but why do you think that SpaceX odds to have a successful IPO is lower now?
Not OP but I will weigh in. The numbers for SpaceX were not looking great, they are burning cash faster than Starship crashing into the Indian ocean. The idea was that with a fast indexing, this would be mostly irrelevant as retirement funds would automatically buy into the IPO after 15 days thus bolstering the company before any sanity would prevail on the markets.
Now that they have to wait a year for that point, that cash burn is going to work against them fairly heavily. There is also something like $20 billion of debt they have to pay back in the next 12 months that might not be covered over so easily now.
That said, SpaceX and a lot of Elons companies have had figures that look terrible for ages, and yet they keep manage to pull rabbits out of the hat. So who knows. Maybe they sell a bunch of assets, they have more than enough to cover the gap.
Not to whom you're replying...
Depends what you mean by successful. If you mean "the IPO goes ahead" then I don't think this makes a difference (unless Elon cracks the shits at this decision and pulls out, which I'm not sure is an option).
If "successful" equates to number-go-up, then my understanding is that Fast Index Entry would have resulted in, effectively, forced purchase of shares by various funds.
When Fast Index Entry (FIE) was a chance of being introduced, the odds of number go up were higher. Now that FIE has been ruled out, there's a lower chance of number go up because there's no "forced blind purchase" group.
They'll still be included in total market indexes (FTSE, MSCI, CRSP).
As I understand it, VTI will be a major thing.
Still, they're float adjusted (for the most part?).
Thank goodness. I was v concerned about the implications of this.
Glad there are some grown ups in US leadership
It requires an incredible level of delusion to think this has anything to do with US leadership.
Trump derangement syndrome at full display here.
They’ll be gone by Monday and replaced by a fitness coach or something.
Good thing they're not dropping the profitability requirements. Ed Zitron would be proud.
As far as I know, will still be included in the NASDAQ 100 (since NASDAQ changed their rules already and SpaceX will be listed on that exchange).
https://podcasts.apple.com/ca/podcast/the-rational-reminder-...
Long listen but a very thorough and nuanced discussion by a bunch of smart investment / finance guys in Canada. No click-bait-sky-is-falling content.
Nothing that you are saying here has any commitment to what to expect, is all heresay. It's 100% ad hominem, to the person. That's a fault whether the direction is complimentary or derogatory. I personally really don't want to see vacuous empty comments like this.
were you trying to reply to someone else?
No, I'm saying they are hyping up some random podcast while saying sweet nothings. I really don't like empty hype. I want some actual content to posts that actually says something, not just links breathlessly encouraging me to go spend an hour listening.
And where did the ad hominem part arise?
https://human.libretexts.org/Under_Construction/Clean_Up_(Pr...
Search for "positive ad hominem".
It's all empty words.
> a very thorough and nuanced discussion
> bunch of smart investment / finance guys
> No click-bait-sky-is-falling content.
The middle one is the ad-hominem puffery. The rest isn't quite exactly 100% 'of the person's, but still doesn't give me any actual leads into what the content is: its just empty puffery.
Looks like US society and its systems are well and alive despite the usual doom and gloom.
It’s a single index… that doesn’t say anything about the country and its systems
So relieved to see this!
Two words - Thank Goodness.
Before the flood of money from the index funds arrive, I'd love to see what's the right valuation for them.
* https://archive.is/https://www.bloomberg.com/news/articles/2...
* https://archive.is/15pOn
For me, that only shows the first two paragraphs.
This lets you read the whole article: https://finance.yahoo.com/markets/stocks/articles/spacex-oth...
Excellent. I was getting ready to reposition due to the risk.
See also S&P press release, "S&P Dow Jones Indices Consultation on Treatment of MegaCap Companies - Results":
* https://press.spglobal.com/2026-06-04-S-P-Dow-Jones-Indices-...
So they did tweak the rule for total market indexes, just not the "curated" ones.
This feels like massive news that general public won’t ever hear.
Basically nothing happened though. SpaceX asked them to change rules and they said no.
Everyone was certain they would. Multiple people I know were rebalancing their portfolios way from the big index funds
Note that Nasdaq and Russel did put in place fast entry rules. S&P is the only one that didn’t.
https://www.nasdaq.com/articles/new-fast-tracks-account-olde...
CRSP is changing the index VTI tracks
I wasn't familiar with the Center for Research in Security Prices (CRSP). Apparently they were acquired by Morningstar in February 2026. I also found this press release from Vanguard announcing they will be updating fund names (including VTI) to reflect the acquisition https://corporate.vanguard.com/content/corporatesite/us/en/c... but nothing on the fund composition or rule changes.
CRSP has had fast track rules for quite a while.
They changed their minimum float rule for these mega IPOs with low float.
I feel like you need at least one of the two rules (time, float)
Yea, this is great but I'm not sure how much this helps since it's just 1/3 keeping their wits about them.
Nasdaq clearly did it for the big bucks and getting the listing, why did Russell bend the knee?
Russell tries to represent what investors are actually buying and selling, a larger swath of the economy than S&P Dow and Nasdaq do
so they get a little bit of a pass for me, but Nasdaq doesn't
Those mega IPOs are the latest grift to unload overpriced shares before the whole AI tulip bubble explodes in everyone's face.
The insiders know it, which is precisely why those IPOs are happening right now. Employees and VCs don't want to be holding the bag. small-time investors will be.
Also, SpaceX is going to unlock more and more on their float at around the same time most indexes will have to buy it. It has been engineered to socialize the losses.
I'm happy SP didn't agree to fast track any of those, unlike VTI and Nasdaq100. I spent the weekend to rebalance all my retirement accounts to make sure none of them are going to fast track those grifty IPOs. Unfortunately, I cannot do that for my taxable accounts as it would generate a tax-event.
They are happening now because the entire space narrative is dependent on SDI, sorry Golden Dome, as a massive heist of taxpayer money for the militarization of space (nobody believes in economic civilian space compute). Like SDI it’s bullshit but like SDI it works at robbing everyone blind.
That relies on Trump in power.
What is prompting SpaceX to IPO all of the sudden?
I'm personally convinced that this is Musk trying to get out of debt from his Twitter purchase.
That is a part of it.
Think of it like security backed bonds, if you bundle a lot of dud businesses into a single business that is doing ok then as an aggregate it looks fine. So bundling Twitter and xAi into SpaceX covers up that. This is why I suspect they will eventually merge Tesla into SpaceX as it is on the decline now.
The problem is that with the current cash on hand and large loans coming due, they only have a 6 month runway. Thus the IPO to get other peoples money to hopefully fund themselves until solvent.
All IPO's are essentially that, people invest in your business, the business uses their money to achieve more, and if it all works out then future profits can eventually be paid back to investors.
> people invest in your business, the business uses their money to achieve more
that was what normally would happen. However, in the last few decades of IPO, it's become common to have two classes of shares - one being the controlling shares that founders hold on to (with 10x the voting rights), and a 2nd class of ordinary (common!) shares with 1x vote per share.
This means the founders (and early investors perhaps) don't give up any controlling stake of a company at all when the IPO while only selling common shares. Doing this means they get to control the company's operations and financial moves, without shareholder oversight, but obtain all of the shareholder investment cash.
You could argue this can lead to better management, as the founders are more likely to care about the company than professional managers that typically would be hired to manage a public company. I say that is only an argument of luck of the draw, rather than a good argument against the above share and voting right splitting.
Look at facebook/meta - would that company be as invested in things like the metaverse, etc, if zuckerberg weren't in a controlling position?
That already happened with the merger of X with XAI and then the merger of Xai and SpaceX.
But the reason is because SpaceX is trying to tool up for orbital datacenters. They're building a bunch of solar cell manufacturing plants and Starship launch pads.
Orbital datacenters is just an excuse of a reason to merge the two companies when there’s nothing else tying them together. They won’t actually happen.
Or at least they are selling the idea of orbital data centers since the technology for orbital data centers does not exist yet or in the short term.
Huge relief. Thank God!
Paywalled.
Thank fucking g-d.
Good.
Good. I'm surprised, though, that the usual fanboys/stans aren't converging on this to protest how unfair the S&P is.
They are.
For all the people worried about spacex inclusion in nasdaq/qqq/etc
It won't matter for your portfolio. Your portfolio will keep growing.
Maybe! Returns aren't guaranteed either way.