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SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

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Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#61

Post by JumpCrisscross »

mapt wrote: post #39
JumpCrisscross wrote: post #3

The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching doom and relaying this rule change by S&P as a fait accompli , stop following them. (It was a common misconception on this thread: https://news.ycombinator.com/item?id=48364055 .)

Contrarily, you can interpret the doom pitches as a necessary political backlash whose degree of panic and whose quantity prevented the change from ending up as a fait accompli. Public decisionmakers do this sort of thing all the time. They "float an idea", "test the waters", "put up a trial balloon". They see what they can get away with. When the decisionmaker has a strong desire for the change, it may only get roll…

> the doom pitches as a necessary political backlash

It was totally misinformed, came well after the public-comment period had ended and had zero net effect other than maybe generating some commissions and management fees for rando managers.

There is bona fide hatred for these companies and their managers. Influencers twisted the facts to channel that for views.

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#62

Post by JumpCrisscross »

btown wrote: post #47
JumpCrisscross wrote: post #23

Earlier quoted context omitted.

> 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 sens…

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 po…

> 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.

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#63

Post by golden-face »

JumpCrisscross wrote: post #3

The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching doom and relaying this rule change by S&P as a fait accompli , stop following them. (It was a common misconception on this thread: https://news.ycombinator.com/item?id=48364055 .)

Oh come on Jump, how can you deny it's not shady?

I could kind of agree with the argument that "well these companies stay private longer so they are more mature" but the float exemption with the seemingly arbitrary calculation to figure out weights completely belies that argument.

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#64

Post by XorNot »

impure wrote: post #52
stubish wrote: post #9

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 po…

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.

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#65

Post by ncallaway »

queuebert wrote: post #35
WarmWash wrote: post #29

Earlier quoted context omitted.

Yeah, but is SpaceX actually worth $1T or does Elon just think that because of how Tesla investors value Tesla?

Historically a $1T market cap with a PE of 20.0 would be achievable with a $50B/yr profit. That seems easily achievable eventually for SpaceX, as it has actual hardware and services and IP.

> Historically a $1T market cap with a PE of 20.0 would be achievable with a $50B/yr profit. That seems easily achievable eventually for SpaceX, as it has actual hardware and services and IP.

It seems crazy to me to make a comparison between a company being valued on it's current profit and then to say it's reasonable for another company to have the same market cap because it could eventually have the same profit.

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#66

Post by tristanj »

jmyeet wrote: post #45
JumpCrisscross wrote: post #23

Earlier quoted context omitted.

> 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 sens…

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 performan…

> 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.

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#67

Post by skissane »

throw0101a wrote: post #11

* 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...

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#69

Post by louiereederson »

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.

Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P

#70

Post by zuzululu »

JumpCrisscross wrote: post #3

The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching doom and relaying this rule change by S&P as a fait accompli , stop following them. (It was a common misconception on this thread: https://news.ycombinator.com/item?id=48364055 .)

Not really seeing the issue you are raising. Seems like a pretty nuanced thread.
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