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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

#321

Post by throw0101a »

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.

> Ah, so you'd like the passive broad market index which contains the 500 biggest good companies?

And a reminder: not just "good" now, but good over time.

Good companies turn bad (Apple almost went bankrupt), and bad companies can become good (see again Apple; in the UK, recently Rolls-Royce).

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

#322

Post by tristanj »

ywvcbk wrote: post #295
tristanj wrote: post #259

Earlier quoted context omitted.

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…

The "total market index" point has been addressed twice now. Nobody ever claimed the S&P 500 tracks all equities. Only you keep bringing it up.

On your claim that these companies "wouldn't be in the top 20 by weight": as I addressed to you other times in this thread, SpaceX float 1 year after IPO would be 50%, giving it an index weight of $800 billion. That places it easily in the top 20 large-cap U.S. companies. The article linked has a chart of forecast free float. Your claim is false.

https://www.economist.com/finance-and-economics/2026/06/01/c...

On "arbitrary modification" of rules: every criterion in the index was itself added or revised at some point. The profitability requirement, the float threshold, the dual-class share exclusion then reinclusion. All these rules were modified. If all rule changes are "arbitrary," so are the existing rules. The only meaningful standard for evaluating a rule change is whether it better serves the index's stated purpose.

The stated purpose of the S&P500 is to be the "best single gauge of U.S. large-cap equities." A company with a $1.75T market cap that ranks in the top 5 by size in the US is, by definition, large-cap. Excluding such a large company is contrary to the stated purpose of the index.

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

#323

Post by Applejinx »

visha1v wrote: post #310

very mature decision by s&p, but at the same time will this not hurt spacex and other big IPOs? i thought the reason these mega IPOs are coming is because investors have run out of money and they companies need access to broader market capital to sustain. without 401k and other funds, won't this just hasten the bubble burst? am i missing something?

This is why people are freaking the heck out and demanding that all the index funds MUST include the doomed stocks because they're just that important and totally aren't a doomed bubble you guys.

Not all viewpoints are unbiased overviews of the markets just wanting fairness. Some have always been trying to sell you something that's not what it seems, and they can be… vituperative.

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

#324

Post by ralferoo »

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…

That would be true IF the stock was already being traded.

All we have at the moment is just Elon saying "I think this is worth $1.5T, convincing a small subset of people to buy shares, and then because of this change, market following funds will be forced to pile in before the market has had time to discover the actual true fair price, thus artificially propping up the price until Elon has had time to unload a load more shares. The rule changes serve only Elon, not regular investors.

Historically, the share price falls sharply after an IPO in the vast majority of cases. In this case, with the asking price masssively over earnings, significantly more than any other company, it should be expected that the price will fall significantly in the weeks after IPO.

Shortening the window before it gets included in the index is a cheap trick to force passive investors to pile in at the inflated prices, in an attempt to artificially boost demand and prop up the share price.

If the company genuinely was worth the valuation being asked for in the IPO, they would have no problems with just waiting a few months before it would be included under the existing rules.

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

#325

Post by deadbabe »

It’s popular to trash these IPOs now but I bet if spacex or the big AI companies don’t follow the same pattern as other IPOs and the stocks just keep climbing and making the shareholders a bunch of money, I can’t wait to see people saying stuff like “the market can stay irrational longer than you can stay solvent!” and giving explanations on why they knew this was going to happen all along and why the rule changes were actually a good thing!

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

#326

Post by tristanj »

Applejinx wrote: post #315
tristanj wrote: post #172

Earlier quoted context omitted.

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…

You are confused what the S&P 500 actually is. It is a benchmark, not a managed fund. Investment funds that track the S&P 500 do not have a say on which stocks to buy. They copy what the index allocates. Whether these companies allocated are risky or not, has no relevance to if the benchmark accurately represents the US equity market. If three of the top 10 largest companies in the U.S. are excluded from the index, which may be the situation this year, then the benchmark is wrong. The benchmark is failing to achieve its stated function.

Your risk argument applies to actively managed funds, not to an index whose entire purpose is to represent the U.S. large-cap market.

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

#327

Post by trumpdong »

movedx01 wrote: post #248
JumpCrisscross wrote: post #213

Earlier quoted context omitted.

> 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 ?

Only Elon is allowed to actively manage my passively managed fund. The fund manager shouldn't be allowed to do it!

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

#329

Post by bdangubic »

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.

Wow, you should educate yourself on what 409A is and how it gets created before writing something like that, you'd find it in the dictionary under the definition for what my original comment was :)

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

#330

Post by collinmcnulty »

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 think this is correct. Gains historically accrue to a small number of companies in a given time window. If you buy all the grocery stores, you’re exposed only to sector risk, if you pick one or two, you’re also exposed to the risk those companies don’t contain the “winners”.
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