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

It seems MSCI will add them, maybe? See: https://www.msci.com/indexes/markets-in-motion/megacap-ipos

But it's written in a rather confusing manner so I'm not certain.

Firstly, I think 0.15% might be significantly lowballing. Other commenters I've read trying to low ball it suggested 0.5%, which matches up with my calculations - this IPO is allegedly $1.5T on the total amount, and 25% is up for sale, making $375B. The S&P 500 market cap is $69T, which puts the IPO at 0.54%.

In addition, that's just the initial IPO free float value, and other shareholders will be free to shed their shares after IPO (and presumably, that's where the bulk of index investment funds will actually buy from), so the free float will be higher, pushing up that share even higher.

Sure, in terms of overall market fluctuations, 0.5% is significantly less than a typical day of market volatility, but on the other hand in terms of my current portfolio, as a dollar amount that's significantly more than my monthly expenditure when I'm not vacationing. I don't particularly want to be funding Elon's exit strategy when I already believe it to be a scam. Thanks to S&P's decision, about 25% of my investments are safe, but approximately 60% of my funds are linked to FTSE World indicies, which is changing the rules.

As I stated in another post, this is just a cheap stunt to force passive investors to prop up the price before it has a chance to settle. The majority of IPOs settle on a price below the IPO price in the months afterwards, and never before have we seen an IPO with such a high P/E ratio. This is literally unprecedented, and the sensible thing to do would be to stick to the old rules to allow the market time to discover the true value before inclusion in the indices. At the moment, the valuation is just a number in Elon's head rather than a fair market valuation. Forcing index-following funds to purchase it at the artificially high price is reckless at best and profiteering at worst.

In addition, it's not just 0.5%. It's 0.5% now, and then the same for Anthropic, and then the same for OpenAI, then all the other IPOs in the future. To put that into perspective, most investors would baulk at 0.38% TER for a passive fund and move to 0.12% TER. 0.5% isn't nothing.

At least someone still has some backbone.

I wonder how much of this decision is driven by recent media coverage about ETF holders getting screwed

Yes, but not in the last decade or so.

In any case, it's been only in the last years that we have had an explosion of a huge variety of funds with low fees, so some of these product strategies need to be retro fitted for a time they did not exist.

I suspect the number of picks you would need is surprisingly small to reach high parity with the S&P.

If you don’t pick the right grocery company, you have a shot at picking the right telecommunications company. You pick fewer winners, but you’re also picking fewer losers.

The real reason to do this is because you want to avoid specific companies that are inside the index. You would only do this if you felt confident in your ability to avoid investing a lot of capital in losers. Even if you’re great at avoiding the telecommunications loser, you might be worse than average at avoiding the loser in other sectors.