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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

#431

Post by Analemma_ »

czhu12 wrote: post #404
Analemma_ wrote: post #393

Earlier quoted context omitted.

The new stocks are still going in, they're just going in after a year (the normal rules), rather than 5 or 15 days. The outrage here wasn't that the stocks were going into the indexes at all, it's that they were going in before price discovery, several quarters of earnings, more float, and expiration of insider lock-up periods, which seemed especially sketchy because of the (correct or not) perception that these IPO…

It seems the general consensus on HN is that they are overvalued and for sure will collapse in value down the road, I could imagine some frustration down the road if these companies actually become, say, 4T by the time they get added to indices.

What examples have there been in the past of a company which did all its growth in the 1-year period following the IPO, then stopped right when they were added to the index?

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

#432

Post by tankenmate »

tristanj wrote: post #265
tankenmate wrote: post #167

Earlier quoted context omitted.

"The S&P rules exist so the index can accurately reflect the market", the rules exist to reflect a subset of the market, and the committee chooses that subset. It's their subset so they get to set the rules, you don't have to use it if you don't want to. If you don't like that subset then create your own index. Then you just need to convince others to use it.

Per the S&P 500 website, the claimed subset of the market is "U.S. large-cap equities". S&P claims their index is "best single gauge of U.S. large-cap equities". But, it's clear that given the current iteration of the rules, none of the major upcoming IPOs of Spacex, Anthropic, or OpenAI are eligible for S&P500 inclusion, and they likely will not be for years. Claiming to have the "best single gauge of U.S. large-cap…

"means your benchmark is inaccurate by my book.", and like The Dude says "Yeah? Well, you know, that's just like uh, your opinion, man."

Create your own benchmark, and you can say it is a subset of "U.S. large-cap equities" and "best single gauge of U.S. large-cap equities" and let the market decide who does a better job.

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

#433

Post by Tangurena2 »

czhu12 wrote: post #281

This does seem sensible and I’m glad most of my holdings are in s&p funds. Just to play devils advocate though, what are the downsides of not having 3 of the biggest 10 in the world not in your fund, if you hold to track broad market performance? Wouldn’t that have a massive blind spot on AI related growth? Whether or not I personally think ai is over hyped or not, the whole point of these ETFs is to make sure I don’…

I'm certain that no index wants to be known as a bubble index. The AI bubble is going to trash huge numbers of industries and wipe out enormous amounts of investor wealth when the music stops. That bubble bursting will make the 2008 financial crisis look like peanuts.

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

#434

Post by hxghcxzf »

l23k4 wrote: post #429
tcp_handshaker wrote: post #383

Earlier quoted context omitted.

At this moment, there is so so much, publicly available information [1] on the fact the SpaceX IPO is the biggest scandal in the long history of Wallstreet insiders fleecing the "Johns". A scandal orchestrated and cheered on by the NASDAQ, as well as Goldman Sachs and JP Morgan the underwriters, that if you spend any money on it, you deserve to be parted with your money. And if you have a 401k...you are forced to buy…

[flagged]

[dead]

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

#435

Post by SpicyLemonZest »

tristanj wrote: post #249
ywvcbk wrote: post #215

Earlier quoted context omitted.

> 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 ar…

Best single gauge, not summary. Systematically excluding companies that are large and buzzy yet not profitable is a matter of intentional design to improve the accuracy of the gauge, even if previous companies were not quite this large. Anthropic and OpenAI are great illustrations of why you might want such a design: the bull case for each is that they're going to dunk the other and become the US's primary provider of AI inference, and neither is yet profitable, so by including both of them in the index you're "double counting" investor expectations of how valuable a company producing profitable AI inference will be.

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

#436

Post by skinfaxi »

bregma wrote: post #300
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.

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 highe…

Interactive brokers offers fractional shares I'm sure other brokers do as well.

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

#437

Post by toast0 »

bregma wrote: post #300
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.

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 highe…

Trading in lots of 100 hasn't been required since I dunno, the 90s?

Assuming you're in the US there are several competent brokers that sell fractional shares. Any broker will do lot tracking and cost basis calculatioms for you, they're required to.

Rebalancing might be a pain, yes. I'd bet the drift isn't too bad most of the time, but it's probably effort every time you add or remove money. You'd want to build a tool to tell you how to add and remove to get closer to the index. If you can get the index weights and your holdings in a machine readable format, it would seem pretty tractable, but it would take time to setup; there's a reason funds have expenses, but index fund expenses are small.

I'm 100% invested in funds because it's a lot less work, but if you felt strongly about excluding certain stocks, I think it's pretty doable for say S&P 500. Tracking a total market index, or an international index would be more challenging. Bond indexes are also challenging to track, even for bond funds.

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

#438

Post by matwood »

tristanj wrote: post #268
matwood wrote: post #214

Earlier quoted context omitted.

Matt Levine, who probably knows more about finance than anyone on this site, has said the same thing. He’s also talked about all the hate mail he gets. Large market etfs like VTI or VOO are supposed to track the market. It would be weird if they ignored trillion+ market cap companies. If the market decides to dump these companies then they’ll fall out of the index. Index criteria have also changed many times over the…

I completely agree. People have parroted the benefits of passive investing and blindly following the benchmark index for decades, yet the instant some overpriced turds (Anthropic, OpenAI, and SpaceX) are considered being adding to the benchmark, they backtrack and fight tooth and nail against including them. All three companies are large enough by market cap ($1T+) to qualify for the S&P 500 benchmark, which claims t…

Market pricing will be interesting. People have been complaining about TLSA being over priced for years and now it's 2%+ of the S&P. Are people selling VOO and VTI because of the TSLA allocation? Nope, in fact TSLA has made them all a lot of money.

People were falling over themselves to invest in these AI companies and SpaceX not that long ago. 75B worth of SpaceX now has to get sold to IPO investors to hit the desired valuation. People say a lot (especially on the internet), but when the rubber meets the road we'll see what people do with their money.

The other bind the S&P is caught in is if these AI stocks IPO and then moonshot before they get added. The question will then be is the S&P an antiquated index? How do multiple trillion dollar companies in the market not end up in the S&P 500 sooner? No one thinks of that case because everyone is so sure they are all going to zero.

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

#439

Post by nothercastle »

philistine wrote: post #74
nothercastle wrote: post #26

Earlier quoted context omitted.

They might but changing the rules for a highly controversial company would do more harm in lost trusts than gain for investors.

Exactly. There is this undercurrent of The End Times everywhere, that this is it. This is the end of ... everything that was. When in fact it is not the end times, and the people at those indexes want to exist longer than SpaceX.

The appearance impropriety is almost always just as deferential as actual impropriety. Missing out on Gains will do a lot less damage than getting caught in a pump and dump scheme

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

#440

Post by anonymars »

tristanj wrote: post #244
ywvcbk wrote: post #216

Earlier quoted context omitted.

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.

> Where did I say [I want to turn S&P 500 to a total market index]?

Right here:

> 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.

If it's not a total US market index, then why is the index wrong to not include it?

Edit: and then again here:

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

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