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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

#291

Post by ryukoposting »

Keeping newly-publicly listed companies off an index keeps outliers from screwing with the index. It's no secret that companies that have recently gone public tend to be considerably more volatile than companies that have been public for a while.

I see a lot of comments saying things to this effect: "S&P 500 is just a metric/benchmark, not a fund, so it should consider the whole market even if that includes a newly-listed but very large company." And yeah, the S&P 500 is an index, not a fund.

But you know what is a fund? SPY, VOO, IVV, FXAIX, and loads of others. Regardless of what institution(s) manage your retirement accounts, you are almost certainly benefitting from the S&P 500 filtering out post-IPO fuckery.

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

#293

Post by ywvcbk »

tristanj wrote: post #252
ywvcbk wrote: post #230

Earlier quoted context omitted.

S&P 500 weights are based the value of shares available on the public market not the market cap. Based on that SpaceX will be nowhere near the top 10. Do you think their valuations wouldn't fall dramatically if they were willing to float a significant proportion of their shares on the market anytime soon.

I addressed that exact point here https://news.ycombinator.com/item?id=48407542 Based on previous IPOs, SpaceX will grow to ~40% float by 12 months, thus if it keeps its current valuation unchanged, will remain near the top 10 spot.

Assuming it's share price does not drop significantly because of that.

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

#294

Post by yorwba »

pid-1 wrote: post #287
yorwba wrote: post #273

Earlier quoted context omitted.

If you pick stocks with the correct weight to track the index, you're effectively running an index fund. And so you don't have to rebalance to keep tracking the index.

1 If you never rebalance, you're never adding new stocks to the index, nor removing stocks that do not belong to it anymore. 2 You need to rebalance to take corporate events into account: new stocks, buybacks, dividends, etc...

You can add stocks whenever you put money in. Whether that's because you got your paycheck or a dividend or some other income is kind of irrelevant. And you can remove stocks when you take money out. But you probably shouldn't start selling one stock to buy another just because their prices moved, unless you have information that lets you time the market.

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

#295

Post by ywvcbk »

tristanj wrote: post #259
tankenmate wrote: post #255

Earlier quoted context omitted.

Sure, but then it comes down to your opinion vs the S&P board's opinion. I suspect (given that there's only been a few days of this getting into the public eye) that more people support the S&P's position vs their critics. But the trade flows will show if people get out of SPX (or SPY/VOO) in the coming days.

My issue is that so many people have forgotten the purpose of the S&P 500 index (i.e. it's a benchmark to reflect the large-cap U.S. equity market), and instead treat it as a list of approved companies they should blindly invest their 401ks into. These people do not want to invest their retirement funds into the upcoming IPOs of the overpriced & unprofitable (SpaceX, Anthropic, OpenAI), and then are arguing the bench…

> But at a fundamental level, the S&P500 index exists to track the market

No, it exists to track a subset of the market based on specific criteria and weights. It's not even based on the market cap of included companies directly.

'S&P Total Market Index' exists to track the market.

> qualify as major members of the index

Not based on the inclusion criteria.

AND even if that were changed they wouldn't be near the top anyway, despite the trillion dollar valuations initially they wouldn't even be in the top 20 by weight.

> and defeats the purpose of the index entirely.

The index has operated based on specific rules defining inclusion criteria for a while. Can we just conclude that it did not become the most popular index despite never being designed to track the full market or be based directly on total market caps.

After all it's the people advocating the inclusion of these companies are advocating an arbitrary modification to the rules just to get them in.

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

#296

Post by basch »

l23k4 wrote: post #179
vannevar wrote: post #124

Earlier quoted context omitted.

>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? Do tell us if you find one I guess.

[flagged]

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

#297

Post by willis936 »

riffraff wrote: post #118
throw0101a wrote: post #10

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.

In the summary table of "proposed changes, current methodology, and result", the result column is "no change" for all rows. What rule tweak are you referring to?

Edit: Ah I see it now. Separate tables for S&P cap-based indices and their other indices.

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

#298

Post by BoggleOhYeah »

anonymousDan wrote: post #282
BoggleOhYeah wrote: post #72

Earlier quoted context omitted.

CRSP has had fast track rules for quite a while. They changed their minimum float rule for these mega IPOs with low float.

Sorry so CRSP will be fast-tracking SpaceX? I just checked and my Vanguard has 50% in that so would like to understand how exposed...

According to their methodology, they will be fast tracking SpaceX (after five days).

The index is float adjusted so its initial weight in the index will be relatively low.

https://global.morningstar.com/en-ca/stocks/how-will-mega-ip...

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

#299

Post by rubyfan »

maest wrote: post #155
hnav wrote: post #134

Earlier quoted context omitted.

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.

At that level they call it financial engineering.

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

#300

Post by bregma »

chvid wrote: post #251
l23k4 wrote: post #179

Earlier quoted context omitted.

Ah, so you'd like the passive broad market index which contains the 500 biggest good companies? Do tell us if you find one I guess.

You can just pick stocks - if you pick a fairly low number of large stocks in broad categories with correct weight, you will track the index.

I don't know about the typical HN contributor but I personally lack the cash to but all the stocks in the S&P. There are 503 stocks tracked in the S&P 500 index. It would cost about 2.8 million USD to buy 100 shares (one board lot) of each if you were naive enough to weight your purchases that way. If you were to weight the stocks differently (eg. total market capitalization of each company) the amount would be higher.

Or, I can pick up 100 shares of an index ETF for a few thousand and have someone else do all the work for me including rebalancing and doing all the other required calculations (lot tracking and cost basis calculations etc.).

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