451–460 of 542 posts
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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…
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More like its a competition to get the listing -- not dissimilar to Amazon shopping cities for its corporate base. Set up a competition and get the best deal would be my speculation on why it was done (as well as goose the demand).
You seem to be confusing "listing" - the stock exchange where a company chooses its stock to trade (i.e. NYSE, AmEx, Nasdaq) with "indexes" - a list of stocks that is often the basis for index funds. The Nasdaq 100 is not the same as Nasdaq. A company can be in many indexes but only one listing. There may have been competition for the listing but there is not competition between indexes for inclusion.
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> 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…
That's a fair point that the inclusion criteria are applied consistently, not arbitrarily. But I fundamentally disagree with their inclusion criteria. It was designed for traditional companies with low growth and high GAAP profitability, not high-growth companies rapidly reinvesting into the core business. Amazon is infamous for having positive cash-flow yet running near-zero GAAP earnings for nearly two decades, bec…
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…
> if you spend any money on it, you deserve to be parted with your money. Yet it's already trading at >20% over IPO price on Bitmex
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On the contrary. There are many benchmarks, some small subset of which are intended to reflect the whole market. There are indices for every little thematic and niche corner or strategy or idea, there are broad-as-possible indices, and there are indices with requirements like listed age and profitability.
I'm not debating any of that. This discussion is about the S&P500 as a benchmark, which has an expressly stated purpose of tracking large-cap US equities. This discussion is about if S&P500 actually achieves this benchmark, when it has (antiquated) rules that exclude large-cap US companies of the likes of SpaceX, Anthropic, and OpenAI.
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> 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…
> 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.
I'm nodding vigorously on this part:
> These companies will likely never meet S&P profitability inclusion criteria for the next 5 years.
But here, you lose me…
> These are not bad companies, but because the S&P inclusion criteria were written for old GAAP profitable companies, and not high-growth companies that invest their cashflow into company growth over profits. Excluding some of the most civilization changing companies from the benchmark means the benchmark is doing a terrible job.
The point of investing in a total(ish) index of the public stock market is to invest in companies that have a reasonable expectation of net-positive future cash flows, justified in part by legally-mandated transparent reporting of their finances.
You can't just buy every publicly-traded stock though: for one thing, that would massively incentivize obvious scammers to do the bare minimum to get their stocks included, and drag the index down. Avoiding companies that are illiquid, non-transparent, or lacking in a clear track record is important. The SpaceX IPO bears more than a passing resemblance to a pump-and-dump scheme:
1. SpaceX's line of business* is tremendously unclear.
2. SpaceX doesn't actually need external capital to fund its operations.
3. SpaceX is floating only a tiny fraction of its putative market capitalization.
4. The main purpose of the IPO appears to be to allow insiders to cash out.
5. The way the lion's share of the IPO gets sold is if large index funds and pension-holding companies demand shares, and that only happens with the index-inclusion exceptions we're discussing here.
So, we agree that these "mega cap IPO" companies won't be profitable in the next 5 years. That's a huge period of time. How can public markets accurately value a company that isn't expected to be profitable for such a long period of time; there are so many things that could change their trajectory towards profitability, all the more so if we accept your premise that these companies are "civilization changing."
My conclusion is that it's perfectly fine, even beneficial, for indices like S&P 500 to avoid any special treatment for these companies. If SpaceX is clearly profitable 5 years from now, and has reached 50% free-float, that seems like a good time to start including it in the index.
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* Nearly all of its revenue comes from launching satellites and running a satellite-based communications network, but much of its putative valuation comes from a hastily glommed-in also-ran AI company, and its association with a person who is famous for running other businesses and for political connections.
This seems a sensible thing to do. If you change the rules on how things end up on your index, you force everyone using that index to reevaluate it. Your index is now perceived as more volatile (and probably is), and all the finance people need to reevaluate the risk of their index funds and decide if it is now 'growth', 'high growth' or whatever bucket it belongs in based on the new risk profile. And then all the po…
> sensible thing to do is to create a new index with the new rules It depends. Indices aren’t funds. They aren’t meant to balance investor interests. They’re meant to communicate some metric about the market. The S&P tells you how big companies are doing in an index optimized to balance representation against trading cost. So in 2005, float was taken into account for weighting (versus just market cap). This made sens…
However, the SP500 index is one of the few indices that is strongly represented in 401K plan options.
That changes its role from "communicate some metric about the market" to forced buying of the metric.
which makes changing the metric, especially in such a drastic way, consequential.
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…
Companies are innovating things that significantly enhance human capabilities and people will still find a reason to drag them down. I am not a fan of either these companies. At the same time, I strongly disagree with these doomer scenarios as they are dangerous for progress of humanity.
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Also worth noting that other index providers are less principled. > Nasdaq changed its rules recently so SpaceX can join the Nasdaq 100 Index, a cohort of the largest non-financial companies listed on its exchange, in just 15 trading days, down from a three-month minimum. FTSE Russell adopted a similar approach, shortening the waiting time to five trading days
if i had to short 1 of the 3, it would be OpenAI