Good. Indexes are supposed to be slow-moving, precisely due to their entry requirement of sustained profitability that skews towards mature companies.
All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
SpaceX and OAI stock will be available through Robinhood, Questrade and all the other retail investor markets. Individuals can make an informed choice to trade it there, rather than have it automatically added to their index fund without having any say.
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
Carvana is the poster child for this. It's astonishing that a company with a history of shady practices, and that has yet to offer a convincing explanation for why it is not a scam, is part of the S&P 500.
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
It’s important to note that index funds will eventually get in, so it’s not like 401k will never be holding these stocks. It would be silly to assume that the stock is going to tank that much on day 1, on the asumption that there are not enough investors to buy the big three IPOs that are coming out this year. There is plenty of money in the market, and everyone knows index funds will buy these stocks when the companies get in, so everyone will be able to dump them if needed in a year or so.
Btw I don’t really know how index funds work, but if they need to track the index as closely as possible, they will all have to buy those stocks on a certain day, no? There will be a crazy price hike when they do so. Or maybe they have terms that let them smoothen their trading around entry and exit?
To a first approximation, yes, the index funds all need to buy the stock on the same day.
An unexpected surge of buying like this should lead to a big price hike. But everyone knows it's happening, so you'd expect every hedge fund and proprietary firm in the world to buy the day before the index funds buy, and sell into the price hike. So in fact the price hike will be a day earlier than expected. But wait, anyone smart enough to see that should buy the previous day...
In this way the "smoothing" of the trading at entry and exit gets passed on to intermediaries: other market participants who are expert at this.
This all costs the index funds, because every dollar of profit for the other firms is a dollar out of the pocket of the end investor. And huge index events like this are a particular bonanza for these traders. But it probably costs less than you think. Ultimately it's a highly competitive market: the slippage from this approaches the extent to which the prop traders have a higher cost of capital, plus a small risk premium. And remember that they don't have to find "extra" money to fund this trade. When they buy SpaceX they will sell 499 other stocks, doing the same trade there in reverse. Here's a study that approximates the effect at 0.86%[0]. By comparison, the banks underwriting the IPO typically take around 6% [1]. Though this will be smaller for a huge IPO like SpaceX, while the index arb trade will be bigger.
Their float will be very small so yes, the value of their shares that anyone could buy at even the most optimistic valuations would be tiny compared to most public megacaps.
> Btw I don’t really know how index funds work, but if they need to track the index as closely as possible, they will all have to buy those stocks on a certain day, no?
S&P wouldn't include them until they became profitable and even if they did they wouldn't even be in the top 20.
No, indexes are meant to track something. The Russel 2000 index has very different criteria for the S&P 500 index. The Dow Jones is yet another one.
The criteria for none of the above is “slow moving”, far from it. Those are all expected to be high growth vehicles for retirement. Safe stuff is bond blended.
Plenty of people at shit in the GFC being invested in “slow moving” S&P 500 companies like Lehman Brothers, WaMu, AIG, GM, etc.
“Was profitable for a while” != “safe” nor is it necessarily good to park money there. You need explosive growth companies that invest rather than profit (like Amazon) being in the S&P 500 are a critical part of its performance.
If retirements only tracked stable mature companies that would be utilities and other stuff that doesn’t actually get you to retirement.
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
The purpose of an index is to provide a benchmark of the market, not to build funds that follow the index.
> The purpose of an index is to provide a benchmark of the market
Usually a subset of the market based on specific criteria. Total market indexes and funds exist, maybe there is a reason S&P 500 despite its "strict" inclusion criteria is more popular than them?
On a fundamental level, the S&P 500 index is meant to be a benchmark of the market. Journalists, policymakers, investment managers, politicians, regular investors, everyone I know all use the S&P 500 as the benchmark of the US stock market.
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.
S&P500 is not a total market index. It tracks a specific kind of large firm, with certain filters.
Fast tracking means that the market likely wont have enough time to find the settled price (especially with the knowledge that passive funds are about to buy), and including a mispriced thing does not necessarily make the benchmark more accurate.
> 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 benchmark to a trend/fad benchmark.
If time validates the valuations the entry will come in time, just like for previous entries.
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 years, and they are changing again to deal with later stage companies coming to the market with already huge valuations.
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.
If you change a benchmark whenever you think it'll be 'wrong', then it becomes a measure of the heuristics you use to predict what'll impact the benchmark rather than a benchmark in its own right.
It may be used as a benchmark, but that’s not actually the purpose of it. The purpose is to serve as a way for people to invest in a representative sample of the market. It can still be a representative sample with safeguards. If you want a benchmark without safeguards, you can calculate one without risking millions of people’s life savings.
It’s a benchmark of the market under certain rules, like having multiple quarters of earnings for the market to value them at.
These companies want special exceptions. If you are an exception why should you be included in a benchmark? At best they should have an asterisk against their name like Sammy Sosa or Mark McGuire if they are not following the same rules.
The decision means companies like SpaceX would not be eligible for inclusion in the S&P 500 until at least one year after its listing and would also need to satisfy the index’s existing requirements for profitability and public float.
Sudden outbreak of common sense.
SpaceX is going "public" with only 4% of the stock being sold to outsiders. The S&P 500 requires a 50% public float. That may disqualify SpaceX for a long time.
Although GOOG and META are listed, despite control being held by insider shares of a different class. There was a time when the NYSE did not permit companies with more than one class of stock to be listed on that exchange. (Except F, FORD, which predates the NYSE). That was lost some time around 1990 or so.
Matt Levine wrote that flouting the rules could be fine if there were market alternatives (he said otherwise it would be a market failure). I am pretty sure there would be market alternatives appearing, at least in the ETF tracking space, and that would erode the brand.
It would be a bad show to have SP500 (cheating rules) underperfoming SP500(proven rules). It would also be a bad show with many financiers and even influencers calling out the corruption.
I for one would be advising newer investments in the proven rules ETF trackers. I also think there might be lawsuits from people who had contracts tied to the old rules. After all if you need to sell to transfer to another vehicle there might be tax consequences.
PS: It is a shame that multiple classes of, non floating, controlling stock do not cause penalties in terms of market cap weight. I will research the issue.
I know an ETF is not an index, but the relationship is tight enough for practical reasons.
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 portfolios need to be rebalanced. Which all takes time, more time than was being proposed. The sensible thing to do is to create a new index with the new rules.
> 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 sense. Also, since the start, the S&P 500 has been a committee-based index. Not rule based. This has made it successful; if you want stable and unchanging, you never went for the S&P 500.
The S&P 500 may not be a fund itself, but Standard & Poor's is a business whose ability to sell services is correlated with the continued relevance of the S&P 500. It absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis.
It seems entirely reasonable to say: "if we make a certain decision, we correlate both our reputation and a nontrivial portion of the U.S. economy with the whims of one of the most volatile personalities in industry, and we should likely pay attention to this trial balloon that shows such anticipatory fear of the decision that we might lose our reputation as an index altogether."
The market cap of the S&P 500 according to Google is ~$65T. Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia. That's a big deal.
The rules around index inclusion exist for a reason. Too much control in one person's hands (which SpaceX has), too small a float (so you don't get price discovery), lack of a history of financial performance and minimal trading days just don't give investors confidence and, like it or not, investment decisions are made based on the index. If you want to argue against passive investment, well, good luck with that.
I think a lot of people have this weird idea that what we need is some theoretically unfettered market for "true" price discovery when it's actually regulations like this that create markets. It's like a libertarian brain worm.
I don't think anybody wants these mega-companies out of the index, specifically. They just don't see why rules that exist for a reason should be suspended when the net effect of that is that investors have less information and there is a lot of forced purchasing. If you have confidence in your IPO, let the market decide what it's worth without trying to fix the price because what they seem to want is for insider lock-ups to end about the time we'd otherwise be getting normal price discovery. Kinda weird.
Investor confidence needfs to be managed by creating a stable, regulated market.
They have to be rebalanced every quarter regardless. And I'm not sure how many people would actually sell due to the inclusion of a single company. They're very loud about it, but no evidence that this is causing a significant amount of selling.
At a fundamental level, an index is supposed to reflect the market. If the current market is IPO-ing unprofitable companies at absurd multipliers, the index should reflect that. Because that is the market.
The longer major indexes exclude these companies, the further the index strays from representing the market, and the worse they do their core job of tracking it.
It's not the index's fault that market is pushing out overpriced and unprofitable companies.
Indices are supposed to reflect a part of the market. That's why you have all of S&P500, the Dow, NYSE Composite, and Nasdaq Composite (and several others) in the US — They each reflect different attributes of the market as a whole.
As it stands, it's clear that the users of S&P500 are not interested in the performance of the parts of the market made up of overpriced (and potentially highly volatile) IPOs.
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’t get a say in the matter, since I’m a terrible stock picker
What a pleasant surprise. I was positive S&P would get strongarmed into the bamboozle like Nasdaq but it seems they have a bit more integrity. Good for them.
I think key difference here is that Nasdaq is also the market. Where as S&P is external. From this view them manipulating their own market which they profit in various ways actually is somewhat more questionable...
Incentives are entirely different. And really now I am starting to think that Nasdaq maybe should not have index it runs in the first place...
Didn't Nasdaq change its rules specifically in order to get SpaceX to list on Nasdaq? Not really sure why other funds would follow them since SpaceX can't list on all of them.
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.
Although it’s good they stood by their rules, elsewhere Reuters points out
> S&P Global said it would modify entry rules for its broader S&P Total Market Index and Dow Jones U.S. Total Stock Market Index, creating a pathway for SpaceX to join those less widely followed indexes.
The market is more unpredictable than it’s been in a long, long time so I hesitate to make a firm prediction but to me the odds that SpaceX will be a successful IPO over a 3-6 month window are significantly lower now. S&P inclusion basically requires funds to hold a position by default, and per their own estimates $20tn of assets are indexed/benchmarked to the S&P.
Not OP but I will weigh in. The numbers for SpaceX were not looking great, they are burning cash faster than Starship crashing into the Indian ocean. The idea was that with a fast indexing, this would be mostly irrelevant as retirement funds would automatically buy into the IPO after 15 days thus bolstering the company before any sanity would prevail on the markets.
Now that they have to wait a year for that point, that cash burn is going to work against them fairly heavily. There is also something like $20 billion of debt they have to pay back in the next 12 months that might not be covered over so easily now.
That said, SpaceX and a lot of Elons companies have had figures that look terrible for ages, and yet they keep manage to pull rabbits out of the hat. So who knows. Maybe they sell a bunch of assets, they have more than enough to cover the gap.
Depends what you mean by successful. If you mean "the IPO goes ahead" then I don't think this makes a difference (unless Elon cracks the shits at this decision and pulls out, which I'm not sure is an option).
If "successful" equates to number-go-up, then my understanding is that Fast Index Entry would have resulted in, effectively, forced purchase of shares by various funds.
When Fast Index Entry (FIE) was a chance of being introduced, the odds of number go up were higher. Now that FIE has been ruled out, there's a lower chance of number go up because there's no "forced blind purchase" group.
Nothing that you are saying here has any commitment to what to expect, is all heresay. It's 100% ad hominem, to the person. That's a fault whether the direction is complimentary or derogatory. I personally really don't want to see vacuous empty comments like this.
I personally really don't care that you dislike podcasts, or don't have the time to click the link and spend five seconds reading the summary, or are lashing out because you had a bad day—can you do that somewhere else?
Those mega IPOs are the latest grift to unload overpriced shares before the whole AI tulip bubble explodes in everyone's face.
The insiders know it, which is precisely why those IPOs are happening right now. Employees and VCs don't want to be holding the bag. small-time investors will be.
Also, SpaceX is going to unlock more and more on their float at around the same time most indexes will have to buy it. It has been engineered to socialize the losses.
I'm happy SP didn't agree to fast track any of those, unlike VTI and Nasdaq100.
I spent the weekend to rebalance all my retirement accounts to make sure none of them are going to fast track those grifty IPOs. Unfortunately, I cannot do that for my taxable accounts as it would generate a tax-event.
Think it does also need to be said because there's a LOT of amateur investors here: If you're a person sitting there thinking you'll drop even just a few thousand dollars into SpaceX, OpenAI, etc when they list - you probably shouldn't. You'll very likely be losing it and you're the one about to make someone else rich.
They are happening now because the entire space narrative is dependent on SDI, sorry Golden Dome, as a massive heist of taxpayer money for the militarization of space (nobody believes in economic civilian space compute). Like SDI it’s bullshit but like SDI it works at robbing everyone blind.
I wasn't familiar with the Center for Research in Security Prices (CRSP). Apparently they were acquired by Morningstar in February 2026. I also found this press release from Vanguard announcing they will be updating fund names (including VTI) to reflect the acquisition
https://corporate.vanguard.com/content/corporatesite/us/en/c... but nothing on the fund composition or rule changes.
Think of it like security backed bonds, if you bundle a lot of dud businesses into a single business that is doing ok then as an aggregate it looks fine. So bundling Twitter and xAi into SpaceX covers up that. This is why I suspect they will eventually merge Tesla into SpaceX as it is on the decline now.
The problem is that with the current cash on hand and large loans coming due, they only have a 6 month runway. Thus the IPO to get other peoples money to hopefully fund themselves until solvent.
All IPO's are essentially that, people invest in your business, the business uses their money to achieve more, and if it all works out then future profits can eventually be paid back to investors.
> people invest in your business, the business uses their money to achieve more
that was what normally would happen. However, in the last few decades of IPO, it's become common to have two classes of shares - one being the controlling shares that founders hold on to (with 10x the voting rights), and a 2nd class of ordinary (common!) shares with 1x vote per share.
This means the founders (and early investors perhaps) don't give up any controlling stake of a company at all when the IPO while only selling common shares. Doing this means they get to control the company's operations and financial moves, without shareholder oversight, but obtain all of the shareholder investment cash.
You could argue this can lead to better management, as the founders are more likely to care about the company than professional managers that typically would be hired to manage a public company. I say that is only an argument of luck of the draw, rather than a good argument against the above share and voting right splitting.
Look at facebook/meta - would that company be as invested in things like the metaverse, etc, if zuckerberg weren't in a controlling position?
That already happened with the merger of X with XAI and then the merger of Xai and SpaceX.
But the reason is because SpaceX is trying to tool up for orbital datacenters. They're building a bunch of solar cell manufacturing plants and Starship launch pads.
Orbital datacenters is just an excuse of a reason to merge the two companies when there’s nothing else tying them together. They won’t actually happen.
It didn't already happen. As you pointed out, people who funded the purchase of Twitter hold SpaceX shares, and this IPO is how they get their money back.
The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching doom and relaying this rule change by S&P as a fait accompli, stop following them.
Contrarily, you can interpret the doom pitches as a necessary political backlash whose degree of panic and whose quantity prevented the change from ending up as a fait accompli.
Public decisionmakers do this sort of thing all the time. They "float an idea", "test the waters", "put up a trial balloon". They see what they can get away with. When the decisionmaker has a strong desire for the change, it may only get rolled back if powerful and widespread public dissent makes itself known, as it did in this case. When they don't really care about the issue, they might cancel it at the first sign that anyone has an issue. We can't know their degree of insistence just based on outcomes in these cases.
> the doom pitches as a necessary political backlash
It was totally misinformed, came well after the public-comment period had ended and had zero net effect other than maybe generating some commissions and management fees for rando managers.
There is bona fide hatred for these companies and their managers. Influencers twisted the facts to channel that for views.
If you’re buying into a tech-marketed fund like the NASDAQ 100 and it doesn’t include a large chunk of the tech market, you’re no longer passively investing in tech. You’re investing in an actively-managed fund.
Historically, companies like SpaceX would have gone public earlier and grown into the index. Recognizing that has changed with multiple $1+ trillion IPO contenders makes sense; as it turns out, I think both NASDAQ and S&P decided correctly.
That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic).
The top comment and most of its subthreads are run-of-the-mill alarmism.
Do you think that all the alarm had any effect on the blocking of the rule change? Is the right time to complain about a possible change is after it has been decided?
> S&P wasn't fait accompli, but the NASDAQ 100 was
Sure. Nobody was properly making this distinction in social media, including on HN. Particularly with respect to the differences in scale and purpose between the NASDAQ 100 and S&P 500.
I could kind of agree with the argument that "well these companies stay private longer so they are more mature" but the float exemption with the seemingly arbitrary calculation to figure out weights completely belies that argument.
It wasn't. It's dumb. But that's different from shady. At the end of the day, the market never priced in the S&P making this decision because the default understanding was a public consultation by S&P goes nowhere. Influencers ran with a consultation being a fait accompli and now anyone saying otherwise is licking billionaire balls.
Yes, I think given that misinfo this was probably the right decision by S&P, everyone would be saying I told you so and screaming about providing exit liquidity.
My prediction is that this will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs. Only time will tell.
> given that misinfo this was probably the right decision by S&P
The misinformation was almost certainly not taken into account, and it shouldn’t have been.
> everyone would be saying I told you so and screaming
Influencers will scream regardless. It’s what they’re paid to do. The NASDAQ 100 made these changes and is doing just fine.
> will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs
There are lots of indices. S&P largely targets those built around mature companies. If you want a total-market index, those exist and tend to rapidly incorporate IPOs.
Good. Indexes are supposed to be slow-moving, precisely due to their entry requirement of sustained profitability that skews towards mature companies.
All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
SpaceX and OAI stock will be available through Robinhood, Questrade and all the other retail investor markets. Individuals can make an informed choice to trade it there, rather than have it automatically added to their index fund without having any say.
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
Carvana is the poster child for this. It's astonishing that a company with a history of shady practices, and that has yet to offer a convincing explanation for why it is not a scam, is part of the S&P 500.
Ah, so you'd like the passive broad market index which contains the 500 biggest good companies?
Do tell us if you find one I guess.
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what's the argument for it being a scam?
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why go that far? herbalife moto is probably "we're a pyramid scheme scam" and they are 45% vs sp500 25% for last 12mo.
you'd better of investing scam500 than sp500 nowadays.
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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
It’s important to note that index funds will eventually get in, so it’s not like 401k will never be holding these stocks. It would be silly to assume that the stock is going to tank that much on day 1, on the asumption that there are not enough investors to buy the big three IPOs that are coming out this year. There is plenty of money in the market, and everyone knows index funds will buy these stocks when the companies get in, so everyone will be able to dump them if needed in a year or so.
Btw I don’t really know how index funds work, but if they need to track the index as closely as possible, they will all have to buy those stocks on a certain day, no? There will be a crazy price hike when they do so. Or maybe they have terms that let them smoothen their trading around entry and exit?
To a first approximation, yes, the index funds all need to buy the stock on the same day.
An unexpected surge of buying like this should lead to a big price hike. But everyone knows it's happening, so you'd expect every hedge fund and proprietary firm in the world to buy the day before the index funds buy, and sell into the price hike. So in fact the price hike will be a day earlier than expected. But wait, anyone smart enough to see that should buy the previous day...
In this way the "smoothing" of the trading at entry and exit gets passed on to intermediaries: other market participants who are expert at this.
This all costs the index funds, because every dollar of profit for the other firms is a dollar out of the pocket of the end investor. And huge index events like this are a particular bonanza for these traders. But it probably costs less than you think. Ultimately it's a highly competitive market: the slippage from this approaches the extent to which the prop traders have a higher cost of capital, plus a small risk premium. And remember that they don't have to find "extra" money to fund this trade. When they buy SpaceX they will sell 499 other stocks, doing the same trade there in reverse. Here's a study that approximates the effect at 0.86%[0]. By comparison, the banks underwriting the IPO typically take around 6% [1]. Though this will be smaller for a huge IPO like SpaceX, while the index arb trade will be bigger.
[0] https://www.eastspring.com/hk/insights/deep-dives/navigating...
[1] https://www.pwc.com/us/en/services/consulting/deals/library/...
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> There is plenty of money in the market
Their float will be very small so yes, the value of their shares that anyone could buy at even the most optimistic valuations would be tiny compared to most public megacaps.
> Btw I don’t really know how index funds work, but if they need to track the index as closely as possible, they will all have to buy those stocks on a certain day, no?
S&P wouldn't include them until they became profitable and even if they did they wouldn't even be in the top 20.
No, indexes are meant to track something. The Russel 2000 index has very different criteria for the S&P 500 index. The Dow Jones is yet another one.
The criteria for none of the above is “slow moving”, far from it. Those are all expected to be high growth vehicles for retirement. Safe stuff is bond blended.
Plenty of people at shit in the GFC being invested in “slow moving” S&P 500 companies like Lehman Brothers, WaMu, AIG, GM, etc.
“Was profitable for a while” != “safe” nor is it necessarily good to park money there. You need explosive growth companies that invest rather than profit (like Amazon) being in the S&P 500 are a critical part of its performance.
If retirements only tracked stable mature companies that would be utilities and other stuff that doesn’t actually get you to retirement.
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
The purpose of an index is to provide a benchmark of the market, not to build funds that follow the index.
> The purpose of an index is to provide a benchmark of the market
Usually a subset of the market based on specific criteria. Total market indexes and funds exist, maybe there is a reason S&P 500 despite its "strict" inclusion criteria is more popular than them?
On a fundamental level, the S&P 500 index is meant to be a benchmark of the market. Journalists, policymakers, investment managers, politicians, regular investors, everyone I know all use the S&P 500 as the benchmark of the US stock market.
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.
S&P500 is not a total market index. It tracks a specific kind of large firm, with certain filters.
Fast tracking means that the market likely wont have enough time to find the settled price (especially with the knowledge that passive funds are about to buy), and including a mispriced thing does not necessarily make the benchmark more accurate.
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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 benchmark to a trend/fad benchmark.
If time validates the valuations the entry will come in time, just like for previous entries.
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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 years, and they are changing again to deal with later stage companies coming to the market with already huge valuations.
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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.
If you change a benchmark whenever you think it'll be 'wrong', then it becomes a measure of the heuristics you use to predict what'll impact the benchmark rather than a benchmark in its own right.
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It may be used as a benchmark, but that’s not actually the purpose of it. The purpose is to serve as a way for people to invest in a representative sample of the market. It can still be a representative sample with safeguards. If you want a benchmark without safeguards, you can calculate one without risking millions of people’s life savings.
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It’s a benchmark of the market under certain rules, like having multiple quarters of earnings for the market to value them at.
These companies want special exceptions. If you are an exception why should you be included in a benchmark? At best they should have an asterisk against their name like Sammy Sosa or Mark McGuire if they are not following the same rules.
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The decision means companies like SpaceX would not be eligible for inclusion in the S&P 500 until at least one year after its listing and would also need to satisfy the index’s existing requirements for profitability and public float.
Sudden outbreak of common sense.
SpaceX is going "public" with only 4% of the stock being sold to outsiders. The S&P 500 requires a 50% public float. That may disqualify SpaceX for a long time.
Although GOOG and META are listed, despite control being held by insider shares of a different class. There was a time when the NYSE did not permit companies with more than one class of stock to be listed on that exchange. (Except F, FORD, which predates the NYSE). That was lost some time around 1990 or so.
It'll be at 50% within 6 months, then 100% within a year.
https://www.economist.com/finance-and-economics/2026/06/01/c...
Matt Levine wrote that flouting the rules could be fine if there were market alternatives (he said otherwise it would be a market failure). I am pretty sure there would be market alternatives appearing, at least in the ETF tracking space, and that would erode the brand.
It would be a bad show to have SP500 (cheating rules) underperfoming SP500(proven rules). It would also be a bad show with many financiers and even influencers calling out the corruption.
I for one would be advising newer investments in the proven rules ETF trackers. I also think there might be lawsuits from people who had contracts tied to the old rules. After all if you need to sell to transfer to another vehicle there might be tax consequences.
PS: It is a shame that multiple classes of, non floating, controlling stock do not cause penalties in terms of market cap weight. I will research the issue. I know an ETF is not an index, but the relationship is tight enough for practical reasons.
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 portfolios need to be rebalanced. Which all takes time, more time than was being proposed. The sensible thing to do is to create a new index with the new rules.
> 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 sense. Also, since the start, the S&P 500 has been a committee-based index. Not rule based. This has made it successful; if you want stable and unchanging, you never went for the S&P 500.
The S&P 500 may not be a fund itself, but Standard & Poor's is a business whose ability to sell services is correlated with the continued relevance of the S&P 500. It absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis.
It seems entirely reasonable to say: "if we make a certain decision, we correlate both our reputation and a nontrivial portion of the U.S. economy with the whims of one of the most volatile personalities in industry, and we should likely pay attention to this trial balloon that shows such anticipatory fear of the decision that we might lose our reputation as an index altogether."
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> They’re meant to communicate some metric about the market.
Is that why people spend time, money and effort creating and maintaining them? They're just broadcasters? That seems dubious.
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an etf that tracks the S&P 500 is what then?
This is a big win for many S&P 500 etf holders
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The market cap of the S&P 500 according to Google is ~$65T. Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia. That's a big deal.
The rules around index inclusion exist for a reason. Too much control in one person's hands (which SpaceX has), too small a float (so you don't get price discovery), lack of a history of financial performance and minimal trading days just don't give investors confidence and, like it or not, investment decisions are made based on the index. If you want to argue against passive investment, well, good luck with that.
I think a lot of people have this weird idea that what we need is some theoretically unfettered market for "true" price discovery when it's actually regulations like this that create markets. It's like a libertarian brain worm.
I don't think anybody wants these mega-companies out of the index, specifically. They just don't see why rules that exist for a reason should be suspended when the net effect of that is that investors have less information and there is a lot of forced purchasing. If you have confidence in your IPO, let the market decide what it's worth without trying to fix the price because what they seem to want is for insider lock-ups to end about the time we'd otherwise be getting normal price discovery. Kinda weird.
Investor confidence needfs to be managed by creating a stable, regulated market.
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Sp500 is not passive. Keeps updating the rules every few years. https://www.reddit.com/r/stocks/comments/1tvuhgy/sp500_100_y...
See top relevant changes in 100 years
They have to be rebalanced every quarter regardless. And I'm not sure how many people would actually sell due to the inclusion of a single company. They're very loud about it, but no evidence that this is causing a significant amount of selling.
Because it hasn't happened yet, and now, won't.
So by that metric the very loud people succeeded: these new IPOs will enter the index under the established rules and time-frames.
At a fundamental level, an index is supposed to reflect the market. If the current market is IPO-ing unprofitable companies at absurd multipliers, the index should reflect that. Because that is the market.
The longer major indexes exclude these companies, the further the index strays from representing the market, and the worse they do their core job of tracking it.
It's not the index's fault that market is pushing out overpriced and unprofitable companies.
Indices are supposed to reflect a part of the market. That's why you have all of S&P500, the Dow, NYSE Composite, and Nasdaq Composite (and several others) in the US — They each reflect different attributes of the market as a whole.
As it stands, it's clear that the users of S&P500 are not interested in the performance of the parts of the market made up of overpriced (and potentially highly volatile) IPOs.
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Why do index inclusion rules exist in the first place….?
Go do a google search
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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’t get a say in the matter, since I’m a terrible stock picker
What a pleasant surprise. I was positive S&P would get strongarmed into the bamboozle like Nasdaq but it seems they have a bit more integrity. Good for them.
I think key difference here is that Nasdaq is also the market. Where as S&P is external. From this view them manipulating their own market which they profit in various ways actually is somewhat more questionable...
Incentives are entirely different. And really now I am starting to think that Nasdaq maybe should not have index it runs in the first place...
Didn't Nasdaq change its rules specifically in order to get SpaceX to list on Nasdaq? Not really sure why other funds would follow them since SpaceX can't list on all of them.
Important to note:
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.
Although it’s good they stood by their rules, elsewhere Reuters points out
> S&P Global said it would modify entry rules for its broader S&P Total Market Index and Dow Jones U.S. Total Stock Market Index, creating a pathway for SpaceX to join those less widely followed indexes.
So not really as principled as it seems
https://www.reuters.com/business/finance/sp-global-keeps-fas...
The market is more unpredictable than it’s been in a long, long time so I hesitate to make a firm prediction but to me the odds that SpaceX will be a successful IPO over a 3-6 month window are significantly lower now. S&P inclusion basically requires funds to hold a position by default, and per their own estimates $20tn of assets are indexed/benchmarked to the S&P.
They'll still be included in total market indexes (FTSE, MSCI, CRSP).
As I understand it, VTI will be a major thing.
Still, they're float adjusted (for the most part?).
Not to say I have an opinion one way or another, but why do you think that SpaceX odds to have a successful IPO is lower now?
Not OP but I will weigh in. The numbers for SpaceX were not looking great, they are burning cash faster than Starship crashing into the Indian ocean. The idea was that with a fast indexing, this would be mostly irrelevant as retirement funds would automatically buy into the IPO after 15 days thus bolstering the company before any sanity would prevail on the markets.
Now that they have to wait a year for that point, that cash burn is going to work against them fairly heavily. There is also something like $20 billion of debt they have to pay back in the next 12 months that might not be covered over so easily now.
That said, SpaceX and a lot of Elons companies have had figures that look terrible for ages, and yet they keep manage to pull rabbits out of the hat. So who knows. Maybe they sell a bunch of assets, they have more than enough to cover the gap.
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Not to whom you're replying...
Depends what you mean by successful. If you mean "the IPO goes ahead" then I don't think this makes a difference (unless Elon cracks the shits at this decision and pulls out, which I'm not sure is an option).
If "successful" equates to number-go-up, then my understanding is that Fast Index Entry would have resulted in, effectively, forced purchase of shares by various funds.
When Fast Index Entry (FIE) was a chance of being introduced, the odds of number go up were higher. Now that FIE has been ruled out, there's a lower chance of number go up because there's no "forced blind purchase" group.
Glad there are some grown ups in US leadership
They’ll be gone by Monday and replaced by a fitness coach or something.
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Good thing they're not dropping the profitability requirements. Ed Zitron would be proud.
https://podcasts.apple.com/ca/podcast/the-rational-reminder-...
Long listen but a very thorough and nuanced discussion by a bunch of smart investment / finance guys in Canada. No click-bait-sky-is-falling content.
Nothing that you are saying here has any commitment to what to expect, is all heresay. It's 100% ad hominem, to the person. That's a fault whether the direction is complimentary or derogatory. I personally really don't want to see vacuous empty comments like this.
I personally really don't care that you dislike podcasts, or don't have the time to click the link and spend five seconds reading the summary, or are lashing out because you had a bad day—can you do that somewhere else?
were you trying to reply to someone else?
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So relieved to see this!
Excellent. I was getting ready to reposition due to the risk.
Thank goodness. I was v concerned about the implications of this.
Those mega IPOs are the latest grift to unload overpriced shares before the whole AI tulip bubble explodes in everyone's face.
The insiders know it, which is precisely why those IPOs are happening right now. Employees and VCs don't want to be holding the bag. small-time investors will be.
Also, SpaceX is going to unlock more and more on their float at around the same time most indexes will have to buy it. It has been engineered to socialize the losses.
I'm happy SP didn't agree to fast track any of those, unlike VTI and Nasdaq100. I spent the weekend to rebalance all my retirement accounts to make sure none of them are going to fast track those grifty IPOs. Unfortunately, I cannot do that for my taxable accounts as it would generate a tax-event.
Think it does also need to be said because there's a LOT of amateur investors here: If you're a person sitting there thinking you'll drop even just a few thousand dollars into SpaceX, OpenAI, etc when they list - you probably shouldn't. You'll very likely be losing it and you're the one about to make someone else rich.
They are happening now because the entire space narrative is dependent on SDI, sorry Golden Dome, as a massive heist of taxpayer money for the militarization of space (nobody believes in economic civilian space compute). Like SDI it’s bullshit but like SDI it works at robbing everyone blind.
That relies on Trump in power.
No?
No one believes the Golden Dome will get built. No one is valuing space on that basis either.
Even SpaceX's IPO isn't valued based on space launch and that's the problem.
* https://archive.is/https://www.bloomberg.com/news/articles/2...
* https://archive.is/15pOn
For me, that only shows the first two paragraphs.
This lets you read the whole article: https://finance.yahoo.com/markets/stocks/articles/spacex-oth...
See also S&P press release, "S&P Dow Jones Indices Consultation on Treatment of MegaCap Companies - Results":
* https://press.spglobal.com/2026-06-04-S-P-Dow-Jones-Indices-...
So they did tweak the rule for total market indexes, just not the "curated" ones.
Two words - Thank Goodness.
Before the flood of money from the index funds arrive, I'd love to see what's the right valuation for them.
Note that Nasdaq and Russel did put in place fast entry rules. S&P is the only one that didn’t.
https://www.nasdaq.com/articles/new-fast-tracks-account-olde...
CRSP is changing the index VTI tracks
I wasn't familiar with the Center for Research in Security Prices (CRSP). Apparently they were acquired by Morningstar in February 2026. I also found this press release from Vanguard announcing they will be updating fund names (including VTI) to reflect the acquisition https://corporate.vanguard.com/content/corporatesite/us/en/c... but nothing on the fund composition or rule changes.
CRSP has had fast track rules for quite a while.
They changed their minimum float rule for these mega IPOs with low float.
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Yea, this is great but I'm not sure how much this helps since it's just 1/3 keeping their wits about them.
Nasdaq clearly did it for the big bucks and getting the listing, why did Russell bend the knee?
Russell tries to represent what investors are actually buying and selling, a larger swath of the economy than S&P Dow and Nasdaq do
so they get a little bit of a pass for me, but Nasdaq doesn't
As far as I know, will still be included in the NASDAQ 100 (since NASDAQ changed their rules already and SpaceX will be listed on that exchange).
This feels like massive news that general public won’t ever hear.
Basically nothing happened though. SpaceX asked them to change rules and they said no.
Everyone was certain they would. Multiple people I know were rebalancing their portfolios way from the big index funds
Looks like US society and its systems are well and alive despite the usual doom and gloom.
It’s a single index… that doesn’t say anything about the country and its systems
Not just any index, it's the most important index.
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> SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
Good. Looks like there's still a bit of sanity left in this world.
What is prompting SpaceX to IPO all of the sudden?
I'm personally convinced that this is Musk trying to get out of debt from his Twitter purchase.
That is a part of it.
Think of it like security backed bonds, if you bundle a lot of dud businesses into a single business that is doing ok then as an aggregate it looks fine. So bundling Twitter and xAi into SpaceX covers up that. This is why I suspect they will eventually merge Tesla into SpaceX as it is on the decline now.
The problem is that with the current cash on hand and large loans coming due, they only have a 6 month runway. Thus the IPO to get other peoples money to hopefully fund themselves until solvent.
All IPO's are essentially that, people invest in your business, the business uses their money to achieve more, and if it all works out then future profits can eventually be paid back to investors.
> people invest in your business, the business uses their money to achieve more
that was what normally would happen. However, in the last few decades of IPO, it's become common to have two classes of shares - one being the controlling shares that founders hold on to (with 10x the voting rights), and a 2nd class of ordinary (common!) shares with 1x vote per share.
This means the founders (and early investors perhaps) don't give up any controlling stake of a company at all when the IPO while only selling common shares. Doing this means they get to control the company's operations and financial moves, without shareholder oversight, but obtain all of the shareholder investment cash.
You could argue this can lead to better management, as the founders are more likely to care about the company than professional managers that typically would be hired to manage a public company. I say that is only an argument of luck of the draw, rather than a good argument against the above share and voting right splitting.
Look at facebook/meta - would that company be as invested in things like the metaverse, etc, if zuckerberg weren't in a controlling position?
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That already happened with the merger of X with XAI and then the merger of Xai and SpaceX.
But the reason is because SpaceX is trying to tool up for orbital datacenters. They're building a bunch of solar cell manufacturing plants and Starship launch pads.
Or at least they are selling the idea of orbital data centers since the technology for orbital data centers does not exist yet or in the short term.
Orbital datacenters is just an excuse of a reason to merge the two companies when there’s nothing else tying them together. They won’t actually happen.
It didn't already happen. As you pointed out, people who funded the purchase of Twitter hold SpaceX shares, and this IPO is how they get their money back.
Baffling number of total-paywall links on the front page here these days.
Good. I'm surprised, though, that the usual fanboys/stans aren't converging on this to protest how unfair the S&P is.
They are.
Huge relief. Thank God!
Thank fucking g-d.
Paywalled.
[dead]
Good.
The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching doom and relaying this rule change by S&P as a fait accompli, stop following them.
(It was a common misconception on this thread: https://news.ycombinator.com/item?id=48364055.)
Contrarily, you can interpret the doom pitches as a necessary political backlash whose degree of panic and whose quantity prevented the change from ending up as a fait accompli.
Public decisionmakers do this sort of thing all the time. They "float an idea", "test the waters", "put up a trial balloon". They see what they can get away with. When the decisionmaker has a strong desire for the change, it may only get rolled back if powerful and widespread public dissent makes itself known, as it did in this case. When they don't really care about the issue, they might cancel it at the first sign that anyone has an issue. We can't know their degree of insistence just based on outcomes in these cases.
> the doom pitches as a necessary political backlash
It was totally misinformed, came well after the public-comment period had ended and had zero net effect other than maybe generating some commissions and management fees for rando managers.
There is bona fide hatred for these companies and their managers. Influencers twisted the facts to channel that for views.
What's the urgency to bend the rules? It is not like SpaceX is banned for good. It will be included as soon as it meets the requirements.
> What's the urgency to bend the rules?
If you’re buying into a tech-marketed fund like the NASDAQ 100 and it doesn’t include a large chunk of the tech market, you’re no longer passively investing in tech. You’re investing in an actively-managed fund.
Historically, companies like SpaceX would have gone public earlier and grown into the index. Recognizing that has changed with multiple $1+ trillion IPO contenders makes sense; as it turns out, I think both NASDAQ and S&P decided correctly.
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What was the common misconception?
> What was the common misconception?
That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic).
The top comment and most of its subthreads are run-of-the-mill alarmism.
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Wrong.
HN has been speculating on how wealth would be extracted from 401k and IRAs at least since the November elections in 2024.
Far before any influencers even thought this would be a thing.
I thought forced cryptocurrency funds, but it turned out to be something else.
Do you think that all the alarm had any effect on the blocking of the rule change? Is the right time to complain about a possible change is after it has been decided?
I don't think doom and gloom on HN had any effect, no.
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S&P wasn't fait accompli, but the NASDAQ 100 was
> S&P wasn't fait accompli, but the NASDAQ 100 was
Sure. Nobody was properly making this distinction in social media, including on HN. Particularly with respect to the differences in scale and purpose between the NASDAQ 100 and S&P 500.
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Oh come on Jump, how can you deny it's not shady?
I could kind of agree with the argument that "well these companies stay private longer so they are more mature" but the float exemption with the seemingly arbitrary calculation to figure out weights completely belies that argument.
> how can you deny it's not shady?
It wasn't. It's dumb. But that's different from shady. At the end of the day, the market never priced in the S&P making this decision because the default understanding was a public consultation by S&P goes nowhere. Influencers ran with a consultation being a fait accompli and now anyone saying otherwise is licking billionaire balls.
>if ... YouTuber... stop following them.
Great advice.
Not really seeing the issue you are raising. Seems like a pretty nuanced thread.
Yes, I think given that misinfo this was probably the right decision by S&P, everyone would be saying I told you so and screaming about providing exit liquidity.
My prediction is that this will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs. Only time will tell.
They might but changing the rules for a highly controversial company would do more harm in lost trusts than gain for investors.
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lol what
You can just wait for the price to drop post ipo as it usually does if you actually want to invest.
> given that misinfo this was probably the right decision by S&P
The misinformation was almost certainly not taken into account, and it shouldn’t have been.
> everyone would be saying I told you so and screaming
Influencers will scream regardless. It’s what they’re paid to do. The NASDAQ 100 made these changes and is doing just fine.
> will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs
There are lots of indices. S&P largely targets those built around mature companies. If you want a total-market index, those exist and tend to rapidly incorporate IPOs.
This comment was flagged, it does not contain anything that could possibly deserve that. Shame on you people.
For all the people worried about spacex inclusion in nasdaq/qqq/etc
It won't matter for your portfolio. Your portfolio will keep growing.
Maybe! Returns aren't guaranteed either way.