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Nasdaq's Shame

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Re: Nasdaq's Shame

#81

Post by overfeed »

SV_BubbleTime wrote: post #39
nighthawk454 wrote: post #31

Earlier quoted context omitted.

Index funds divvy up money into stocks, in this case weighted by market cap. More market cap = bigger slice of the pie. SpaceX wants to instantly jump near the top of the pie - capturing tons of the money in index funds for itself, and also therefore taking it away from other companies stocks. SpaceX (and others like OpenAI, Anthropic)'s private market cap valuation is so high that if they IPO they would instantly ju…

And if you an approximate 5 year old investor normal person… Just buy everything you can on day1 and go along for the ride?

> Just buy everything you can on day1 and go along for the ride?

What does adding demand to something with a very limited supply do to the price? You won't be subverting anyone's plan here - you're just hoping for a greater fool[1] will buy from you later, if you buy at inflated prices on day 1.

1. https://en.wikipedia.org/wiki/Greater_fool_theory

Re: Nasdaq's Shame

#82

Post by kmeisthax »

Any Canadians in the room should remember this as the exact mechanism by which Nortel Networks became astronomically huge. Any time Nortel got more valuable, index funds tracking the Toronto Stock Exchange (TSE) loaded up on Nortel, amplifying the price increase. This gave the company massive amounts of capital to buy other companies with, which generated more headlines, which brought in more investor capital, which brought more index funds in. In fact, at one point Nortel was so valuable it made the TSE too homogenous to legally index, at least until Nortel lobbied Canada to change the rules regarding diversified index funds.

If you aren't Canadian (like me) you can watch this Bobbybroccoli video that explains it very well: https://www.youtube.com/watch?v=I6xwMIUPHss

Spoiler alert for the Bobbybroccoli video, but it turns out this trick doesn't work forever. And when Nortel inevitably crashed it left a good chunk of Canadians as bagholders. And looking at the stock market over the past few years, where basically all the the growth is seven companies, I'm starting to wonder if we're finally seeing America's answer to the Nortel fiasco.

(No, Lucent doesn't count, even though they're literally America's counterpart to Nortel. The key factor that made Nortel a problem was the lack of diversity in the Canadian market. Lucent crashed and burned in a field of hundreds of growing big-cap stocks, Nortel was an extremely big fish in a tiny pond.)

Re: Nasdaq's Shame

#83

Post by edoceo »

nighthawk454 wrote: post #77
gruez wrote: post #50

Earlier quoted context omitted.

>That is the scheme described: how to short squeeze retirement funds who do not even have shorts for fun and profit. How many retirement funds use the nadasq 100 as the benchmark? The only thing that's really objectionable is the 5x multiplier, and so far as I can tell that's confined to the nasdaq 100 index. If the funds use a sane index without such shenanigans, it won't be affected nearly as much, and the whole de…

Most indexes will be affected. Two of the most common indices - the S&P500 and DJIA - are cross-exchange and include Nasdaq stocks. The biggest market cap companies on the market (MAG7) are all on the Nasdaq exchange and comprise about 35% of the S&P.

Is this grey cause it's wrong? They are all on Nasdaq; and also around 35% of S&P. What am I missing? Is it that the "Most indexes" part is wrong (cause there are more than a few thousand ETF)?

Re: Nasdaq's Shame

#84

Post by cindyllm »

SilverElfin wrote: post #62

Funny how all this rule making happens so quickly for friends and family members and donors of the Trump administration. Just like it recently did for SpaceX when they got approval for launching 1 million satellites. The corruption is so out in the open, but it is happening all the time - and there are other controversies already like the Epstein files, ICE, Iran, etc - so these go unnoticed. Our political system is…

[dead]

Re: Nasdaq's Shame

#85

Post by dh2022 »

nighthawk454 wrote: post #77
gruez wrote: post #50

Earlier quoted context omitted.

>That is the scheme described: how to short squeeze retirement funds who do not even have shorts for fun and profit. How many retirement funds use the nadasq 100 as the benchmark? The only thing that's really objectionable is the 5x multiplier, and so far as I can tell that's confined to the nasdaq 100 index. If the funds use a sane index without such shenanigans, it won't be affected nearly as much, and the whole de…

Most indexes will be affected. Two of the most common indices - the S&P500 and DJIA - are cross-exchange and include Nasdaq stocks. The biggest market cap companies on the market (MAG7) are all on the Nasdaq exchange and comprise about 35% of the S&P.

Actually these two indices will not be affected k as the article explains

Re: Nasdaq's Shame

#86

Post by [deleted] »

markisus wrote: post #38

I’m trying to understand the mechanics here. I get that SpaceX and Nasdaq are in cahoots to get SpaceX bundled with a bunch of other stocks (and that bundle is called QQQ?) But why must retail investors hold this bundle? If I’m holding now, I can sell it and buy a different bundle right? And if I’m not holding it now, I can just continue not to buy it after SpaceX gets included.

[deleted]

Re: Nasdaq's Shame

#87

Post by Retric »

bagacrap wrote: post #71
dweez wrote: post #69

Earlier quoted context omitted.

This is a slightly tongue-in-cheek way of saying that if you believe a security is severely mispriced then there is a straightforward way to express that opinion.

Shorting is really not that straightforward. It is a avery advanced topic because it mandates the use of leverage. Many (most) investors are long-only, especially the ones being taken advantage of here.

> especially the ones being taken advantage of here.

This is a great argument why buying an index is a poor choice for a long term investor. You can avoid a great deal of shenanigans by randomly purchasing stocks and holding them for 50 years. Even a 0.02% annual fee costs you 1% of your long term returns over that timescale.

But there’s tradeoffs to everything.

Re: Nasdaq's Shame

#88

Post by infinitewars »

bryanlarsen wrote: post #46
Veserv wrote: post #41

To explain the mechanism simply. Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$. You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company. You then rotate out a company for a new one also worth 1 G$. The index is still 100 G$, but to match the index you are contractually required to sell your 20% own…

Yes, when SpaceX gets added to the index, it's going to skyrocket for just that reason. The other reason why SpaceX stock is going to skyrocket is because of the "infinite potential". After all, Elon is going to be God-Emperor of Mars, and how much is a piece of that worth? The OP knows this and wants a window to profit from this squeeze. For the general public index owners, the sooner it's added to the index the bet…

SpaceX has always been a about convincing private industry to fund the militarization of space.

See https://en.wikipedia.org/wiki/Golden_Dome_(missile_defense_s...

Mars is a thin cover story to get the engineers to feed the War machine. "National security" / nuclear threat is a great excuse to get politicians to sell out the country.

How about we focus on global security?

Re: Nasdaq's Shame

#89

Post by exmadscientist »

edoceo wrote: post #83
nighthawk454 wrote: post #77

Earlier quoted context omitted.

Most indexes will be affected. Two of the most common indices - the S&P500 and DJIA - are cross-exchange and include Nasdaq stocks. The biggest market cap companies on the market (MAG7) are all on the Nasdaq exchange and comprise about 35% of the S&P.

Is this grey cause it's wrong? They are all on Nasdaq; and also around 35% of S&P. What am I missing? Is it that the "Most indexes" part is wrong (cause there are more than a few thousand ETF)?

Yeah, it's wrong.

Nasdaq, Inc. is a company with a stock market ("the NASDAQ") and an index "Nasdaq 100"). They want SpaceX to be listed on their market, because they like having more things on their market for all the usual reasons. They are, apparently, offering to manipulate their index to win the listing.

Accordingly, anything that uses or tracks this particular index (Nasdaq 100), such as the QQQ fund, will potentially have to pay for this manipulation.

Anybody not holding or indexing to the Nasdaq 100 index contents will not particularly care and will not really gain or lose any more money than on an ordinary trading day. In particular, this will have zero effect on stocks that merely trade on the NASDAQ exchange.

Indexing to the Nasdaq 100 is pretty uncommon, outside of QQQ, so most people will not care.

Re: Nasdaq's Shame

#90

Post by twothreeone »

Veserv wrote: post #41

To explain the mechanism simply. Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$. You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company. You then rotate out a company for a new one also worth 1 G$. The index is still 100 G$, but to match the index you are contractually required to sell your 20% own…

> To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want.

I can't imagine "any price they want" is quite right here. At the very least, shouldn't we expect underwriters and other stakeholders (in this case Nasdaq, Inc.) to negotiate option-contracts as part of the IPO deal to cover their future obligations?

Yes, it might be a "worse" deal than those initial 5% - though we don't even know that - but then institutional investors time horizons are typically much longer than 6 months. Unless you think SpaceX goes straight down to 0, it seems like a risky but calculated, long-term investment.

I agree they could be more transparent about it, but maybe they will send out a notice in the prospectus update?

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