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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

#241

Post by loeg »

insane_dreamer wrote: post #157
loeg wrote: post #46

Earlier quoted context omitted.

You're making a similar mistake treating it as fait accompli that SpaceX will tank between IPO and some future date, but that isn't a given either.

sure it's not a given, but I certainly am not confident enough that it won't happen to bet my money in it, which I would automatically be doing if it was admitted to the SP500

It would make up less than 0.15% of the index with the limited float available at IPO. Even if it went to zero, your portfolio wouldn't notice it.

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

#242

Post by ywvcbk »

fragmede wrote: post #90
bdangubic wrote: post #50

Earlier quoted context omitted.

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) :)

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 409a has a lot of words and numbers to justify a particular valuation

That's tangential. The valuation is based on supply and demand, nothing else.

Amongst other things the supply part of the equation will be low because all these companies are only to make a very small proportion of their shares available on the public markets.

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

#243

Post by lovich »

tristanj wrote: post #163
lovich wrote: post #144

Earlier quoted context omitted.

> 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 inde…

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…

> Baseball rules exist to prevent cheating.

> The S&P rules exist so the index can accurately reflect the market.

I personally believe that accurately reflecting a market involves not allowing cheating. I personally believe that getting to change the rules so that your IPO gets included before the general market can discern your value because of your connections to the benchmarks is cheating.

If you want to disagree with me on these points then please do so, but understand why I am claiming that this behavior is cheating.

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

#244

Post by tristanj »

ywvcbk wrote: post #216
tristanj wrote: post #177

Earlier quoted context omitted.

"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 revis…

You want to turn S&P 500 to a total market index. Why? That was never its purpose.

No? Where did I say that?

The purpose of the S&P 500 is to be the "best single gauge of U.S. large-cap equities". That's direct from their website. I never dispute this.

I dispute the fact they claim to be the best benchmark of large-cap U.S. equities, yet have rules that (currently) exclude large-cap equities like SpaceX, OpenAI, or Anthropic.

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

#245

Post by ywvcbk »

tristanj wrote: post #115
pdpi wrote: post #83

Earlier quoted context omitted.

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…

> what an index describes vs what investors prefer

What makes you think S&P 500 did not become the most popular index (instead of full market ones) because of the rigid entry criteria and and rules for weights.

Amongst other things the weighting is not even based on the market cap.

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

#247

Post by mamonster »

themafia wrote: post #105
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…

> 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.

Once you have an index, you can offer all sorts of products around it.

-You can offer a return swap to an investor so he can "invest" in the index. You can alternatively build a whole list of derivatives and products around it and offer them to investors instead (think Itraxx,Vix,etc)

-A fund manager can use it as his benchmark and you get to see if he is good or not.

-If its a factor index you can now use it for risk management and return attribution.

The key thing today is that creating a new index that isn't a fad is very hard. There has also been a lot of consolidation of indices into few players (SP, MSCI, Bloomberg) as it's obviously an economies of scale business.

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

#248

Post by movedx01 »

JumpCrisscross wrote: post #213
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?

> is SpaceX actually worth $1T Actually irrelevant to an index calculation. If your index manufacturer is taking this into account at any level, they're actively managing. S&P predates the modern active-versus-passive dichotomy, but it functions within it in practice, and despite being a leader of committee-based indexing philosophy, they've broadly found success by also being champions of passive management. And par…

If someone is trying to bend the rules of my passively managed index fund to their will, are they trying to actively manage my passively managed index ETF ?

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

#249

Post by tristanj »

ywvcbk wrote: post #215
tristanj wrote: post #153

Earlier quoted context omitted.

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…

> Because the index needs accuracy So you are saying that S&P 500 should be merged with Russell 2000 or rather just become a fully market index to be more "accurate". You do know that's something that exists already, having different indexes makes perfect sense and consumers can pick the ones they want based on their risk profile and preferences. > most civilization changing companies from the benchmark It took Googl…

I am saying none of those things. S&P claims their S&P500 index is the "best single gauge of U.S. large-cap equities". That's taken directly from their website.

I dispute this claim, because the (current) rules for S&P500 inclusion exclude companies like SpaceX, Anthropic, and OpenAI. All of these companies are planning to IPO this year, and even if these companies maintain their present valuation for a year, none are eligible for S&P 500. Due to profitability requirements.

Yet these are all U.S. large-cap companies, among the top 20 largest in the U.S., and by S&P's description of the index, should be included. Not including these companies makes the index inaccurate.

> [Google and Microsoft took years go get into the index], so what's new?

Because SpaceX, Anthropic, and OpenAI are $1T+ companies. Google and Microsoft were much smaller relative to the size of the index when they joined.

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