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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

#311

Post by expedition32 »

Panzer04 wrote: post #198
HerbManic wrote: post #137

Earlier quoted context omitted.

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, t…

The real issue is that existing shareholders will all be eyeing each other wanting to exit at the highest price it'll ever be. That's a lot of selling pressure. I can't imagine many people seriously believe SpaceX is a business worth 1.75T.

Satellite internet is not a new invention- Iridium already did it and they went under. Nice for war zones and remote areas but not much else.

Besides the Chinese are launching their own network which will mean a price war. And the Chinese tend to win those.

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

#312

Post by SecretDreams »

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…

> These companies will likely never meet S&P profitability inclusion criteria for the next 5 years.

They won't stay gigacaps for 5 years if they don't become profitable. At their size, they can't just keep burning money at that scale under the public's eyes. The funding will divert from VC to shareholder equity and that will quickly see they don't stay gigacaps.

So this is a self correcting problem. Either they'll start making money and hit profitability targets or their market cap will diminish.

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

#313

Post by lelanthran »

tristanj wrote: post #223
lelanthran wrote: post #181

Earlier quoted context omitted.

> 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.

The S&P 500 brochure describes itself as "the best single gauge of large-cap U.S. equities". That language implies they act as a benchmark, which I find questionable, given that based on their current eligibility requirements, it would exclude all three of SpaceX, Anthropic, and OpenAI. All three companies are in the top 10 largest companies in the US by market cap, based on their current valuations. If these compani…

> The S&P 500 brochure describes itself as "the best single gauge of large-cap U.S. equities". That language implies they act as a benchmark,

Okay, but isn't that gauge measured over a specific timeframe? Since investors in this index have timeframes in years/decades not days, why would you expect the index to have a ranularity of days?

> That language implies they act as a benchmark, which I find questionable, given that based on their current eligibility requirements, it would exclude all three of SpaceX, Anthropic, and OpenAI.

Sure, but it excludes lots of companies. This specific index is risk-averse and caters to risk-averse investors; regardless of whether the company is SpaceX, Anthropic or OpenAI, rick-averse investors are going to shy away from any share that hasn't been traded long enough for price-discovery to kick in.

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

#315

Post by Applejinx »

tristanj wrote: post #172
phlakaton wrote: post #165

Earlier quoted context omitted.

> 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.

What is the S&P 500 meant for then? It was created in 1957 as a benchmark of US equity performance. That's S&P Global's own stated purpose. If it's systematically excluding companies that represent significant chunks of total US market cap, the index isn't doing its job.

Investment funds are for making money. Nobody cares about 'accurately reflecting the state of the market' if that's objectionably high-risk. You invest in an investment fund to make money.

There is no way you can commit to holding big quantities of these methane bubble swamp gas companies and claim it isn't high risk. You'd have to be certain you could bail at the right moment, and that doing so would not obliterate the market through your giant market move… or commit to being a giant bubble of fraud that can never possibly blow up, forever.

These are not responsible ways to make vast sums of money, not because they're unethical but because they're gambles at very high stakes.

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

#316

Post by throw0101a »

JumpCrisscross wrote: post #19
throw0101a wrote: post #12

Earlier quoted context omitted.

> The top comment and most of its subthreads are run-of-the-mill alarmism. Worth considering: * https://en.wikipedia.org/wiki/Prevention_paradox And the rules for the NASDAQ 100 were changed, as were MSCI and CRSP: * https://www.schwab.com/learn/story/some-indexes-accelerate-e...

Most assets don’t follow those funds. And NASDAQ 100 is explicitly tech focused, I support them making the change. The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500. The market wasn’t pricing in any rebalancing. Commenters were screaming bloody murder about it. In the middle, I’m sure some numpties generated trading and management fees…

> The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500.

Yes, which is why the news that S&P isn't changing their rules is kind of notable. Vanguard's S&P 500, $VOO, just hit US$ 1 trillion AUM; the next biggest, $IVV, is just over $800B; $SPY is just under $800B.

* https://etfdb.com/compare/market-cap/

* https://www.tradingview.com/markets/etfs/funds-largest/

That's about USD 2.5T.

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

#317

Post by notahacker »

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…

> If S&P started arbitrarily excluding parts of the market they find uninvestable, then that's compromising the integrity of the index, and defeats the purpose of the index entirely.

But they haven't started arbitrarily excluding parts of the market they find investable: on the contrary you are demanding they start arbitrarily change a long established and pretty basic rule to arbitrarily include pre-profit companies. Criteria on non market cap factors including positive earnings and liquidity are defined explicitly on their website along with the subjective "best gauge", which is entirely compatible with the idea it's a better gauge of large market cap company performance if it only includes companies whose market cap is supported by having given the bare minimum indication their business model can be financially sustained, not the ventures whose potential is most hyped[1]

[1]which obviously applies to OpenAI and Anthropic to a greater extent than SpaceX which actually achieved positive earnings as a private company before it pivoted to a model which bankrolls other Elon ventures and ambitions and needed to IPO as a result.

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

#318

Post by clbrmbr »

Animats wrote: post #218
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.

That's what "value funds" do.

But do they historically beat the S&P 500?

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

#319

Post by throw0101a »

lokar wrote: post #75
JumpCrisscross wrote: post #19

Earlier quoted context omitted.

Most assets don’t follow those funds. And NASDAQ 100 is explicitly tech focused, I support them making the change. The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500. The market wasn’t pricing in any rebalancing. Commenters were screaming bloody murder about it. In the middle, I’m sure some numpties generated trading and management fees…

VTI uses crsp and is very large

Fourth largest, after three S&P 500 ETFs:

* https://etfdb.com/compare/market-cap/

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

#320

Post by clbrmbr »

twiceaday wrote: post #254
chvid wrote: post #251

Earlier quoted context omitted.

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.

And the relative values of those stocks will shift requiring rebalancing. You might be able to do that with new dollars for a while but hopefully, eventually, the swings are much more than new dollars and then what? Pay capital gains tax on sales to rebalance? Convince yourself the new random allocation is fine?

Philanthropically-minded people will move the winners to a donor advised fund which gives FMV write off without ever paying capital gains.

With index funds you never have the strong winners to do this with, and so giving is far less tax-efficient.

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