Comment by roadside_picnic
4 hours ago
It's more insidious than that. These IPOs aren't being rushed, they were waiting for all the pieces to be in place to force 401ks and other retirement plans to buy these IPOs.
The most recent change was the NASDAQ adopting the "fast change rule" which allows newly IPO'd companies to be listed in the index after only 15 days of trading. This rule was decided March 30, 2026 and only came into effect May 1, 2026.
The plan is to rapidly drive these prices up in the first 15 days, get the companies listed in the NASDAQ so funds are forced to purchase them at higher prices, then leave retirement accounts holding the bag.
> The most recent change was the NASDAQ adopting the "fast change rule" which allows newly IPO'd companies to be listed in the index after only 15 days of trading.
Official justification, and other changes besides timeframe, e.g.:
> First, eligibility and company size. As multi‑class share structures have become more common, we now consider both listed and unlisted shares when determining eligibility and ranking. This allows the index to reflect a company's full economic size, while index weighting remains based solely on listed shares. This change affects who qualifies for inclusion, not how constituents are weighted.
* https://www.nasdaq.com/newsroom/nasdaq100-index-methodology-...
> A new method to calculate the market capitalization of companies to determine their eligibility for inclusion in the index. It involves adding listed stock and unlisted shares that are part of different share classes. Scrapping a rule that requires companies to float a minimum 10% of their shares. Companies with a low float will receive a lower weighting on the index. […]
* https://www.reuters.com/business/new-nasdaq-rules-include-fa...
Very few 401ks offer the NASDAQ 100 as an investment option. Last I checked it was <1%.
Apparently the rule change also affects CRSP, which is the index behind Vanguard's Total Stock Market (VTI) index funds.
https://finance.yahoo.com/markets/stocks/articles/spacex-ipo...
VTI in turn is the primary holding of most of Vanguard's Target Date retirement funds, which are widely held in 401ks.
NASDAQ index has a 3x float weighting (and a far, far smaller total capitalization) which makes it far more susceptible.
Other indexes do not have these multipliers, and are much larger. The exposure for e.g. VTI is far, far less.
Recent changes:
> CRSP indexes were also recently changed to better accommodate fast entry. New IPOs are eligible for CRSP's suite of indexes after five trading days, provided they pass the index's eligibility and investability screens. Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion. The weighting of stocks in CRSP indexes is also based on free float, which should help address the investability challenges associated with thinly traded stocks.
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
Total market indexes and target date funds will include this and SpaceX on float adjusted basis I believe. The blast radius is much larger than funds that track the NASDAQ directly.
But isn't that what "total market" means? I don't see how if you invest in a total market fund you could declare "except for SpaceX, Anthropic and OpenAI". Why is it so bad for these accounts to be invested in these companies anyway? Seems pretty typical, i bet all kinds of companies are added to total market indexes each year.
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No but your funds are backed by ones that are
As unlikely it is to happen at scale, as a thought process - what would happen if people start selling those index funds in a mad rush? Just drives the transaction volume because those with that new money will just buy something else in the market?
I know SpaceX, Anthropic, and OpenAI will probably be a drop in the bucket in terms of scale of these funds, (free float % etc). But, is it realistic to take the money out of index funds for a bit until the price of these new stocks come crashing eventually?
If people actually dumped index funds for cash en masse it would be catastrophic. To attach some numbers, MSFT averages about 35M shares in daily volume, and that includes all the market makers, HFTs, etc. BlackRock (iShares) owns 593M shares of MSFT and Vanguard owns another 482M. Together, the amount of shares that index funds own is about a month and a half of total trading volumes. I'd bet that such a crash would unfold over about 2-3 days, which brings up the specter of stocks literally going "no bid", where there are not enough buyers for every seller to sell, at any price.
Likely the government would step in and inject cash directly into the markets to support them in such a scenario, because a broad-index stock market crash is the modern-day bank run. Retirees carry the bulk of their savings in the form of stocks; if it disappears, we'd likely face revolt.
Same old story of too big to fail. The government will "inject cash", that is borrowed, so that retirees 401k accounts don't go down. But who pays back the borrowed funds? The non-retirees. Everything is optimized for the boomer generation to be fine, who cares about anyone else?
These stocks crashing (not saying it will or won’t happen), means AI is crashing, and that will be a much broader selloff than these 3. Add Microsoft, Micron, Amazon, Oracle, Nvidia, Supermicro, Dell, etc, any company that has direct or indirect exposure to the massive AI boom (and possibly their lenders).
Just look at Corning’s lifetime chart
While unlikely to happen at scale, by way of anecdata I'll say that I and my extended family have almost all shifted money away from funds that are heavily coupled to the fate of GenAI.
The bottom is going to fall out of the market and it's going to take years to recover, I don't see any reason to suffer through that (and neither do my retirement-age relatives).
I'm after steady gains in an approximately efficient market, not a wildly unsustainable speculative boondoggle, thanks.
So you’re still hedging or you 100% fled AI? I presume you have gone to a broader portfolio. But if tech crashes doesn’t everything? And isn’t tech holding up the entire market so they won’t let it happen? And how can you even avoid GenAI if people are cramming it into everything and it’s constantly shocking sectors of the market?
If the bottom is falling out of the market in AI I think it's likely other things will fall too though.
What’s your portfolio? I don’t particularly have a wealth of investment options in my employer-provided 401k (ADP Workforce Now)
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example of a steady gain in an approximately efficient market if Big Tech crashes?
>The plan is to rapidly drive these prices up in the first 15 days, get the companies listed in the NASDAQ so funds are forced to purchase them at higher prices, then leave retirement accounts holding the bag.
Dumb question: why couldn't retirement accounts simply not purchase these?
These funds don’t invest actively (picking individual stocks). Instead they invest in indexes that track larger portions of the market. So they’ll automatically buy once the company is listed on the NASDAQ.
Why do I imagine that no one whose retirement account is about to get smoked is in place to make decisions about whether or not this is a good investment
Seems like there should be a market for a no-Elon/OpenAI/Anthropic ETF out there.
Or one that just imposes a reasonable waiting period on adding newly-IPO’d listings.
almost all 401k plans offer funds based on s&p 500, not nasdaq/russell others. s&p has also halved their trading days requirement from 1 yr to 6 months, but that's still sufficient to be past the post-ipo lock-up period.
I don't think the S&P has actually made a decision yet. It is in progress, though: "The S&P Index Consultation on MegaCap IPOs" is the search term
What is being considered by S&P:
> Stocks would become eligible for the index after six months rather than 12 months. The requirement to have a minimum Investable Weight Factor of 0.10 (roughly at least 10% of shares publicly floated) would be dropped. Companies would not be required to demonstrate profitability.
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
Though:
> Still, S&P Dow Jones reminds market participants that the proposed changes would apply only to index eligibility. The actual inclusion of new constituents remains entirely at the discretion of the index committee.
It is not going to take 15 days for short selling hedge funds to right-price these IPOs. It is going to take something closer to a few seconds.
Hedge funds won't try to short the stock; the holders are almost all institutional investors and insiders who are long on the stock and have no reason to lend them to HFs betting on a price decline.
What they might do is trade bespoke instruments like a credit default swap on datacenter construction deals. Stays underneath the radar of politicians and tech insiders who are invested in a particular outcome.
Until the inevitable crash in price when the lockup of employee shares end and they dump their shares onto the market. These fresh companies shouldn’t be included into passive investing securities until 180 days at least. It’s just making the public bag holders.
I get the sentiment that this is unscrupulous, however, isn't 15 days enough time to find the right price? Or will that not really happen until first quarterly earnings report, which will not occur within that 15 day window?
The fact that you know there’s a large pool of price insensitive buyers only 15 days away has to have some price impact.
No, IPO pops, and honey moon periods are common.
And there are plenty of ways to manipulate the price, such as issuing a low float to a hyper hyped stock..
4-8 quarters for most tech IPOs to settle. IPOs are manufactured for the good times around young co's, so not surprising, and economic stability isn't a question of days/weeks/months.
And yes often a falling knife
This is pretty predictably wall street & federal regulators scamming normal people, retirement funds, etc, taking their fees and exit window at everyone else's expense
I mean the goal is that you have multiple earnings report to show sustainability.
Meanwhile some of these companies are also lobbying to be able to only have to submit annual or biannual earnings reports, too.
Everyone is looking for multiple ways to leave the dumb money holding the bag.
This has been a thing in the CRSP indexes (ie. the benchmark for Vanguard’s VTI) forever. As long as it meets float and cap requirements, it’s inserted into the indexes five days after trading begins.
It makes sense. They intend to track the market as it is.
Though, you can definitely make the case that the popularization of index funds has allowed their holders to essentially become patsies to hype IPOs.
> As long as it meets float and cap requirements
Even with the CRSP indexes this was recently changed to make fast-tracking for these IPOs easier.[0]
> CRSP indexes were also recently changed to better accommodate fast entry . . . Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion.
That change is notable because both Anthropic and SpaceX are planning to IPO at well under that old 10% requirement.[1] Neither would have qualified for fast-track inclusion before, but both are virtually guaranteed to clear the absolute valuation bar.
[0]https://www.schwab.com/learn/story/some-indexes-accelerate-e...
[1]https://www.economist.com/finance-and-economics/2026/06/01/c...
The person I was responding to was speaking to the fast-track concept, which has been a thing in CRSP indexes for a quite a while.
The float requirement changes are directly due to these huge IPOs only placing small amounts of float on the market. Their goal seems to be tracking the market and making this change prevents them from excluding two notable companies from their indexes.
IIRC CRSP indexes are float-weighted so they aren't going to attempt buying a ton of these IPOs anyway due to that low float.
Again. Would I have made the change? No because placing that little float on the market isn't kosher IMO.
2 replies →
> This has been a thing in the CRSP indexes (ie. the benchmark for Vanguard’s VTI) forever.
CRSP has recently changed their rules:
> CRSP indexes were also recently changed to better accommodate fast entry. New IPOs are eligible for CRSP's suite of indexes after five trading days, provided they pass the index's eligibility and investability screens. Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion. The weighting of stocks in CRSP indexes is also based on free float, which should help address the investability challenges associated with thinly traded stocks.
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
Nonsense.
The extremely small float of these offerings will make index weights a rounding error.
Ask your LLM of choice to compare the likely value of shares to be held by index funds with the market cap of each of these companies.
They only go into the index if they are actually worth enough to go into the index. If they drop below a certain value they will naturally be kicked out of the index just like any other company. I.e. if they are not actually in the top 500 US companies then they will not be in the 500 index. The risk of any one company is balanced by all the other companies in the index also.
If they really are a scam, their value will drop and they will be kicked out of the index. I still don’t understand how this means people will be “holding the bag”.
Additionally if you really believe that they are a scam and their price will fall you can just short the stock to completely neutralize their effect on your 401k.
How do these people sleep at night coming up with schemes like that?
On a big pile of money surrounded by beautiful women.
They don't. They work all night to invent them.
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Very true. Anthropic just raised money at the end of last week.
There's no way they could have done that without telling those investors the S-1 was prepared and awaiting their signature on the round before they hit Submit, so to speak.
If you believe this is going to happen you can change the allocations of your retirement plans.
You can protect yourself, but many won't be aware of the situation until it's too late, and institutionally managed funds won't be able to change their rules in time to avoid holding these as part of the index funds they hold.
Many individuals can, but good luck reaching out and convincing the entire country that they should look into making changes to their retirement fund allocations without sounding like a kook.
There's maybe, at best, 1% of the country even aware that this might be a problem.
What should we be looking for?
In your 401k portal/website there's usually a setting like "I plan to retire on year X". When you set that, or something similar, there's typically a managed fund that gradually decreases risk as you approach that year. When you have lots of time before retirement you can ride the ups and downs but as you get closer the less time you have to recover from a downturn so the more conservative you want your investments.
If you're really worried and want to be conservative tell the portal you want to retire in 2030. That will allocate your investments to something conservative and you'll be more protected from a downturn. On the other hand, you'll also be equally protected from an upswing.
/not a financial advisor
I’m not sure I could. Even starting to research how to prevent being affected by these changes shows that there’s layers upon layers of systems that are being manipulated, and there are costs charged for moving the capital in my retirement account to other accounts.
Saying you as in any random person can protect themself from a group of dedicated experts who also have access to levers the common person can’t pull, is kind of not believable on its face.