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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

#181

Post by lelanthran »

tristanj wrote: post #141
lovich wrote: post #128

Earlier quoted context omitted.

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…

> 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.

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

#183

Post by mandevil »

JumpCrisscross wrote: post #135
lovich wrote: post #132

Earlier quoted context omitted.

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 n…

> 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…

Just a FYI, S&P rolled back the dual-class rule. It was in place from 2017 to 2023.

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

#184

Post by l23k4 »

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 .)

[flagged]

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

#185

Post by elictronic »

jkestner wrote: post #101
fragmede wrote: post #90

Earlier quoted context omitted.

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 the…

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...

That’s total addressable market. It’s claiming that AI products they could build could be that amount. It assumes they gain 100% of the market which techbros are basically claiming is most current human effort. It’s stupid, but not what’s actually driving the price.

They are making more revenue off satellites than nearly every current AI subscription today put together. The launch capacity and growth in space based applications are the real company, everything else is to line Musks pockets and have markets subsidize his dumber projects.

It’s a shell game. I believe in their Space based products, but I’m not touching those investments until the market levels out.

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

#186

Post by l23k4 »

thatswrong0 wrote: post #32
harshalizee wrote: post #27

Earlier quoted context omitted.

Not really. The underlying rules for Nasdaq has changed. The preexisting ruleset was used by investors to gauge their portfolio balance. Now investors have to revaluate their portfolio based on the new ruleset as their fundamental risks have changed.

Yeah, the rules have kind of made the passive investment active. I don't understand OPs point at all. I don't understand why we suddenly change the rules and rush things, and OP has provided 0 justification for that.

>I don't understand why we suddenly change the rules and rush things

Because this is how the rulemaking processes for these indices have always worked?

Why are you suddenly making this argument now, and weren't complaining about previous rule changes?

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

#187

Post by jddj »

tristanj wrote: post #153
majormajor wrote: post #138

Earlier quoted context omitted.

> 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 benchma…

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 nex…

Maybe you know this already, but this reads like exactly the kind of reasoning that people looking back at irrational market euphorias point to as a sign things were about to go awry.

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

#188

Post by tristanj »

usef- wrote: post #145
tristanj wrote: post #120

Earlier quoted context omitted.

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.

Those filters for S&P 500 inclusion criteria have changed many times. They are not sacred nor set in stone. The question is, do those filters, which were designed for GAAP profitable traditional companies & discriminate against fast growing cash-flow-reinvesting startups that prioritize growth over profit, unnecessarily exclude major players in the U.S. stock market? The S&P inclusion criteria reward companies that prioritize profit over growth.

SpaceX, Anthropic, and OpenAI are all giga-caps preparing to IPO, and none of them will be eligible for S&P inclusion because of the 12-month profitability requirement. At current valuations, all are part of the top 20 largest companies in the US. These companies may be excluded from the S&P500 for potentially years, until they reach 12 months of profitability.

And you are vastly overstating the effect of S&P500 fast track inclusion, the plan was to reduce it from 12 months to 6 months; which is more than enough time for the market to find a price.

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

#190

Post by elictronic »

riffraff wrote: post #108
fragmede wrote: post #90

Earlier quoted context omitted.

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 the…

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.

Closer to 1.7 trillion for space. You’re quoting launch but discounting satellites and broadband.

The AI stuff is dumb and just subsidize Elons prior dumber investments.

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