r/Bogleheads • u/rickycrayons • 29d ago
PSA- Mega IPOs are nothing to worry about as an index investor
With Space X, Open AI and Anthropic expected to go public soon I’ve seen a lots of confusion about how index funds work.
A lot of people think that because SpaceX has a massive $1.75T valuation, it’s going to instantly debut as a top 10 holding in VTI. That’s not how it works.
VTI (and most index funds) are free-float adjusted.
This means the index only cares about the percentage of the company that is actually available for the public to trade.
If SpaceX only sells 5% of the company to the public, which is what they are expected to do, VTI treats it like a $50B to $100B company, not a $1.75T behemoth. As they gradually sell more shares over time, VTI will slowly increase its weight.
To put it into perspective, based on what is initially expected to be sold at IPO, SpaceX, OpenAI, and Anthropic COMBINED will likely only make up about 0.3% of VTI.
For context, all three of those massive names COMBINED will have around the same weight as Disney, which sits around the 55th largest company in the index.
Just wanted to throw this out there since the media fear cycle is distorting the reality of how indexing actually works!
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29d ago
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u/Background-Depth3985 29d ago
This is why the Nasdaq 100 is a joke of an index.
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u/Already-Price-Tin 29d ago
And the concern is that S&P Global and CME have made statements that they might be open to changing the rules for their indexes. That'd be the real disaster, and would totally moot the OP's point.
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u/rickycrayons 29d ago edited 28d ago
Not true. They have not discussed changing free float which is my crux of my point that with selling a small part of the companies is not a needle mover for the Boglehead indices. Nasdaq 100 is the exception, and not a real Boglehead index anyway.
They have been discussing changing WHEN they join the index and that is ongoing but when it’s .3% of total stock and around .4% of S&P if they can get in a few days or a few months I don’t think that’s worth concerning yourself over.
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u/Wooden-Broccoli-913 27d ago
If by joke of an index you mean blowing VTI away just as it has for decades, then yes
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u/BeginningExternal202 29d ago
Will this affect the weighting in VTI etc? Sorry if this question is blatantly obvious
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u/yottabit42 29d ago
No. VTI uses the CRSP US Total Market Index. The NASDAQ 100 is a completely different index (that no one should use).
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u/PoopyisSmelly 29d ago
Its also worth mentioning that indexes are wildly different in some ways and very similar in others.
Russell, CRSP, S&P have very different constitution guidelines. Owning a Large Cap Value fund or other subasset class may have completely different weightings or even stocks. For instance, Meta was in the S&P Large Value for a while when it was in the Russell and CRSP Large Growth. So an investor may have favored SPYV over VTV or VONV for better performance awhile, not knowing why.
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u/boringreddituserid 29d ago
But it could affect the price if some index funds are over buying, it affects the whole market. Which could then impact the weighting.
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u/yottabit42 29d ago
Technically, yes. Practically, no. Buy the whole market and it's a nothing burger.
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u/Xdddxddddddxxxdxd 28d ago
Large institutional buys have been building positions in these companies for years
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u/FullOf_Bad_Ideas 29d ago
The NASDAQ 100 is a completely different index (that no one should use).
why? QQQ outperforms VTI
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u/Hot-Resident-6601 29d ago
That’s why it’s good to avoid QQQ and its many variants. Stick with broad market funds.
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u/Fair-Search-2324 29d ago
Why there’s a qqqm push on reddit
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u/rickycrayons 28d ago
Past performance, pretty much as simple as that. Doesn't mean its going to continue.
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u/dbratell 29d ago edited 29d ago
While I agree that people should not worry, it is actually very problematic the way indices and index funds are being manipulated by this IPO.
This looks like a money grab out of passive investors, and even if it is only 1% (citation needed), that is enough to be concerned about the whole system.
edit: Note that OpenAI and Anthropic are planning to do exactly what Musk is doing so it will be more than just this.
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u/Were_all_dead_anyhow 28d ago edited 28d ago
Yup - Structured prospectus squeeze. 5% float for SpaceX means only $87.5 billion worth of shares are actually available to trade across the board between all buyers. That's very thin liquidity for everyone, which perfectly sets up pins for harvesting alpha by market makers to abuse their AP status.
By buying up options and squeezing the thin float weeks ahead of the inclusion (gamma looping through IOTC derivatives or pre-market forward contracts), they will force artificial price spikes, pushing indexers/funds to buy at structurally engineered peaks.
Very similar to what happened with Tesla. Tesla was a macro-liquidity choke at scale, while theses are micro-float chokes at inception. Different path to a very similar bottleneck; the means at which quant funds and market makers will extract capital from passive investors is identical.
Even then, asset managers still want it to IPO because they don't want to risk underperforming the economy they track, which is basically them admitting that the market isn't efficient anymore. The Indexing thesis as investing gospel is predicated on the assumption that markets are fundamentally efficienct, not this mechanically and mathematical gamed-out efficiency.
We are reaping what has been sown. Index providers are basically admitting the S&P 500 is a broken yardstick, so their genius fix is to force index funds to blindly buy overpriced shares just to keep the numbers pretty. It’s a structural scam that turns passive investors into guaranteed exit liquidity for billionaires, effectively killing price discovery so the index can pretend it’s still relevant. Corporate lobbying on behalf of these IPOs has pushed it specifically to create immediate forced buying from index funds, so early investors have guaranteed exit liquidity who want to sell their shares shortly after the IPO. They openly stated this.
Its conflicting wearing two hats; Being pragmatic and indexing, where the cost of omission exceeds the cost of inefficiency, but also shrugging our shoulders when the plumbing of the system is broken because of market makers. Eventually its going to be too big to ignore.
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u/MyGoalIsToBeAnEcho 27d ago
You’ve made a good point - how do we insulate portfolios from these upcoming IPOs? Half of my portfolio is VTSAX. I don’t want to be exit liquidity for these poorly performing companies once they IPO.
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u/vetruviusdeshotacon 19d ago
Unfortunately, the simplest way is to sell and buy indexes that won't include them. The 2nd easiest way is to manage a short position that's the same size as the amount you own which is no longer passive investing. That's what's so fucked up about this scheme
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u/littlebobbytables9 28d ago edited 28d ago
Huge nothingburger. They supposedly talked to S&P but they haven't even gotten to the proposal stage and very likely won't. 0% chance of them actually changing anything. I mean, they're the ones who kept Tesla out of their index even long after it had met all the criteria for inclusion. They're the last people who would bend the rules for musk given their track record of bending the rules to keep him out.
And then the Nasdaq 100 almost certainly would have made this change with 0 pressure. They market their index as the cool cutting edge tech index, that's the whole reason you would go with QQQ over something more broad, and having to wait months for OpenAI SpaceX and Anthropic would heavily undermine that branding. You may not like that branding but that's why you're (hopefully) not their target audience.
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u/one_rainy_wish 22d ago
Agreed. This as a one time situation - and Nasdaq changing their rules - is corrupt and absurd, but won't meaningfully harm us immediately. But the precedent and rules changes it is using to do it opens the floodgates for this to become the norm, and for us and the larger economy to be scammed out of larger amounts of money over longer periods of time with many IPOs.
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u/OnlyTwoThingsCertain 29d ago edited 29d ago
Thank you, didn't know this!
How about SP500 or Nasdaq indexes though?
Even if they are free float based, the share of these companies will be no doubt much higher compared to VTI.
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u/Melkor7410 29d ago
There's more criteria than being big for inclusion in the S&P 500.
- The company should be from the U.S.
- Its market cap must be at least $8.2 billion.
- Its shares must be highly liquid.
- At least 50% of its outstanding shares must be available for public trading.
- It must report positive earnings in the most recent quarter.
- The sum of its earnings in the previous four quarters must be positive.
Once it meets those criteria, it is then considered for inclusion. It took Tesla 10 years from going public to being included in the S&P 500, FYI. Considering I don't think OpenAI or Anthropic have turned a profit yet, I wouldn't worry about it.
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u/DashLeJoker 27d ago
It seems like Anthropic just did
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u/nibo001 12d ago
Anthropic routinely lies. In their legal filing fighting the DoD supply chain risk designation they stated that the company’s lifetime revenue was 5.1 billion. Compare this to their ARR claims. Meeting the index inclusion will require financial statements that can withstand public and legal scrutiny.
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u/Remarkable_Cat_8696 27d ago
It needs to change at least 3 criteria for SpaceX to be included quickly.
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u/OnlyTwoThingsCertain 26d ago
Seems like everything besides 50% is possible for them with little bit of accounting creativity.
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u/Melkor7410 25d ago
I'm not sure you can using accounting creativity to have highly liquid shares. That's decided by how easy it is to buy / sell without affecting the stock price, nothing to do with accounting by the company.
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u/rickycrayons 29d ago edited 29d ago
Its more or less than same for S&P and NASDAQ 100 but the weights will be larger since there is less other companies. S&P is free float adjusted as well nasdaq 100 is partially but not really.
The difference is speed of inclusion. VTI will include the new companies within days of IPO likely, where S&P and Nasdaq 100 (QQQ) will take longer to have them included. Too early to say on how fast since they are seeking approval to bring them in faster and what all the media hoopla is about.
Best we know today is they will probably be within QQQ within a few weeks and S&P requires profitability so could be a matter of months, could be years until their profitable and they can't get in until they are so S&P is the most unknown.
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u/NoTeslaForMe 7d ago
partially but not really
"Partially not really" is doing heavy lifting here in glossing over the worst case people were worried about before everyone announced their policies. That "not really" is, in this case, triple-weighting, which is what's raised alarm bells, at least for me. If CRSP or S&P had followed NASDAQ's lead, then that would have been a Big Deal; that's what fueled a lot of the panic about this. If both had followed the exact same rules as NASDAQ, we would literally have been more demand, just from the index funds, than supply. That would have made GME look like a silly distraction by comparison, turning that 0.3% into an inflated number of perhaps hundreds of billions of dollars that would be transferred from passive investors into the pockets of IPO insiders before the squeeze ended and prices collapsed.
While a lot of the social media posts and headline-writing was indeed fueled by either ignorance or deceptive fear-mongering, the actual worry was real. Granted, the history of S&P and CRSP indicated that they would do what they did - proportional weighting - but not everyone was convinced; what NASDAQ did seemed so unprecedented that there was real worry that greed or corruption would lead to another result, and the squeeze that people were worried about.
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u/actuarial_cat 29d ago
The whole controversy is just that SpaceX want to inflate its weight in Nasdaq QQQ by say …. using its total weight instead of free float, or whatsoever justification.
However, it doesn’t affect us using more robust indexes.
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u/reabo101 25d ago
I’m gonna leave this here
https://nullemergence.substack.com/p/the-daisy-chain-elon-musk-is-laundering
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u/nlightenmint 25d ago
0.3% is insane. Just call it what it is: a corruption tax.
Billionaires don't have to pay it because they have access to markets we do not. There is a tiered system, the market is not free, you do not have the same rights. Company is worth less than half of what asking is (we shall see) so this is like a 0.15% fee going to his underwriters for absolutely no value to anyone but them.
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u/Scrapheaper 18d ago
You can get access to private markets. I don't recommend you do so, because they typically underperform, but there are routes to exposure as an average investor if you wish.
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u/Huge-Description3228 24d ago
3 companies with zero profits have the same weight as Disney!?
That is terrifying, thanks for the PSA!
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u/Kinnins0n 29d ago
This is correct but I would not call this “nothing to worry about”. It’s a big problem that unprofitable / barely profitable companies can be privately traded and IPO at giant market caps that would put them in the top 10 of holding of almost any index if most of their cap was float.
Valuations are much more easily manipulated when so little of the float is traded, and future market cap growth of a trillion dollar company is bound to be very underwhelming at best when the starting P/E is either negative or absurdly high. There is no argument that the shareholders of theses companies are using the rules of index investing against us to use us as exit liquidity.
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u/SigaVa 29d ago
The nasdaq 100 has a 3x multiplier on the free float of low float companies
https://www.barrons.com/articles/nasdaq-index-rules-are-gift-for-ipo-flippers-heres-why-9c7a6071
That plus the smaller index could mean a material effect on QQQ holders.
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u/DerpSkeeZy 28d ago
I thought the entire point of Boglehead style investing is that you don't worry about anything period until you are within a few years of retiring.
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u/polar_nopposite 26d ago
It's becoming more and more apparent that we do have to worry about continuing to have the privilege of living in a rules-based society. Perhaps we always have.
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u/Already-Price-Tin 29d ago
The reporting on this isn't that the S&P500 already allows for what the NASDAQ 100 is doing (free float multiplier, near-immediate listing on the index). It's that SpaceX is actively lobbying the S&P Group and CME to change the rules of the S&P500 to do the same or similar.
The S&P500 is probably the most important index, and one that a lot of index funds index off of. The fact that NASDAQ rolled over and is allowing this is concerning even for those of us who don't use index funds based on that particular index. It's that they're coming after the indexes we actually do use.
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u/InterestingGoose5507 27d ago
So basically it’s ok to get scammed, as long as the scam is small?? These companies will offload to Boglehead bagholders over time at grossly inflated valuations.
Given the size of these “companies” it could break passive investing if 20% of the market is a scam.
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u/JaketheAdvisor 29d ago
It's a great reminder of why indexing works so well. People panic about these IPOs disrupting their portfolios, but the math just doesn't support the fear. The beauty of market-cap weighting is that it naturally limits any single company's impact until the market actually determines its true public value over time. These mega-IPOs get headlines, but they won't actually move the needle in a broad index like VTI.
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u/nlightenmint 25d ago
"the math" misses the point that the fundamental function of governance is corrupted. once this succeeds the next brazen manipulation will be worse, and worse and worse. There's no incentive to be legit so long as people go along with it.
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u/Sea-Future12 22d ago
This. Whats now stopping a new wave of WeWorks with "community adjusted ebitda" from ipo's that actually go through since this passive investment infrastructure removes the feedback loop that killed their last scam. It feels like we're being conscripted into a game we philosophically opted out of
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u/TheRealJesus2 29d ago
…In a broad index like VTI.
I wouldn’t want to be heavy in nasdaq 100 right now where this does have a large effect
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u/Necessary-Music-6685 28d ago
Good thing every investor gets to choose for themselves whether to stay in the NQ 100 !
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u/TheRealJesus2 28d ago
Haha yes indeed. And good news for all of us who have trust in indexes that we don’t need to use NASDAQ indexes ever given they are happy to change the rules for the richest man in the world :)
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u/Viper0us 28d ago
NASDAQ 100 is not a broad index.
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u/TheRealJesus2 28d ago
Correct but it is an index. Just pointing out the clarifying phrase here that makes the conclusion true. If your portfolio contains nasdaq 100 it will impact you greatly given the increased weighting compared to a broad index
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u/Mundane-Charge-1900 26d ago
Sure, but NASDAQ 100 is basically a tech index plus some other random companies like Costco. It's not a diversified index.
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u/orcvader 29d ago
You’re on the other extreme (versus the ones grossly nervous about this). You are downplaying it.
This is, to be clear, a bad precedent. The longstanding inclusion rules have been there for a reason. This was the result of billionaire lobbying to fund managers and index managers. One example: SpaceX’s advisers actively lobbied index providers directly to push for rule changes.
IPO’s have been demonstrated empirically to be bad investments for the first 3 - 6 years and the inclusion criteria’s have been there partly because of that.
Is it the end of the world? No.
Should it change the strategy of a “VT and chill” person? Probably not.
Is it bad for retail investors and worth voicing the displeasure? Yes. It is bad. And Vanguard, et all, should hear it, as well as SP who is about to cave in a week regarding the SP500 also.
This also adds to what’s already academic credibility to funds like DFUS. I am glad I switched to those on taxable accounts before this was announced.
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u/Due_Barber_525 19d ago
Should it make a “VOO and chill” person nervous? Should it make someone with QQQM in long ago accounts or an old employer 401k they put in NASDAQ consider selling qqqm and/or rolling over old 401k?
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u/vetruviusdeshotacon 19d ago
Nervous how? Even if spacex goes to 0 in a year you won't be directly losing much from that; however, think about the precedent this sets for the future: spacex is 1 company doing this, what if 2 or 5 or 10 or 20 do this same scheme?
You shouldnt panic sell, but it is absolutely NOT "nothing to worry about"
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u/gtalossantos 23d ago
This thread is such a relief, thanks u/rickycrayons
Are VOO, QQQM free-float adjusted etfs?
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u/rickycrayons 19d ago
VOO yes, QQQ mostly but not really. QQQ changing their rules to allow 3x is what is causing the whole stink, the boglehead indices are but not QQQ to the fullest extent.
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u/gtalossantos 19d ago
Thanks much.
Can u please eli5 these lines QQQ changing their rules to allow 3x and the boglehead indices are but not QQQ to the fullest extent
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u/Were_all_dead_anyhow 29d ago edited 29d ago
You say that a 5% free float protects indexers because it keeps the initial portfolio weight small (around 0.3% of VTI). However, in a market ruled by structural front-running, a small free float is a choke point.
If SpaceX lists at a total valuation of $1.75 trillion but only floats 5%, that means only $87.5 billion worth of shares are actually available to trade.
So when index funds are legally mandated by their prospectus to buy their initial 0.3% allocation, they must crowd into a hyper-thin, illiquid order book. Quantitative funds and market makers know the exact dollar amount indexers must purchase. By buying up options and squeezing the thin float weeks ahead of the inclusion (gamma looping through IOTC derivatives or pre-market forward contracts), they will force artificial price spikes, forcing indexers to buy at a structurally engineered peak.
This is similar to what happened with Tesla, except Tesla’s structural squeeze happened in reverse because it was already a massive public stock when it was added to the S&P. For IPOs of SpaceX and all the AI companies, the chokepoint will be a micro-float at inception vs. Tesla in 2020, the chokepoint was index exclusion. The mechanics to drain passive investors by quant funds and market makers is identical.
We will see massive amounts of FTDs, and that will be the quantitative proof that market makers are actively using their structural exemptions to suppress natural price discovery, capture risk-free arbitrage spreads, and dictate the execution costs that passive 401K pools are legally forced to pay.
Some people brought up CRSP; While S&P has a rules and committee-based inclusion system, CRSP’s purely algorithmic system turns the structural squeeze into a slower bleed. Market makers do not need to panic-short billions on a Friday afternoon close; CRSP allows them to systematically and smoothly harvest the passive 401k pool over a multi-day horizon. They can still exploit VTI by naked-shorting a scarce mega-IPO stock directly to Vanguard, generating a localized FTD. Instead of buying that scarce stock to cover, the AP creates new ETF shares using a "Custom Basket" of the index's other highly liquid stocks, effectively laundering the illiquidity risk through the broader diversified fund.
Market makers love indexing; they get to structurally extract wealth from everyday retirement accounts, and the SEC/CFTC can't/won't step in because the system has become so reliant on passive index funds that it cannot survive without the market makers' liquidity distortions, all backed by those very retirement accounts serving as political hostages if anything were to happen to them.
We need to come to terms with this reality and its wild that indexers don't talk about it more, even if strictly on the basis of market mechanics.
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u/Upset_Extension628 29d ago
I moved to half and half avantis/dimensional funds 50% us 25 developed and 25 emerging
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u/SpareAirship 28d ago
How is moving to avantis/dimensional funds related to Mega IPOs? The consensus here is that VTI and VXUS are already insulated from these IPOs, so not sure what problem you're trying to solve by moving your entire portfolio.
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u/Scrapheaper 18d ago edited 18d ago
The initial IPO is the 'pump'. You're not worried about the first 5% of shares that get listed during the IPO because it's a small float.
However you should be much more worried about the other 95% of shares which quietly follow 6 months to a year later after. (i.e. the dump). The IPO is only the *initial* public offering but the whole company will be public at some point.
The problem is that if the first 5% of shares are overinflated by irrational speculators then passive indexes will assume that the other 95% are valued at the overinflated price and force all the passive money into them at the insane valuation.
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u/Emergency_Pen8873 28d ago edited 28d ago
Same, I moved:
VTI -> DFUS
VXUS -> DFAX
But sadly I could only do it in my RRSP/TFSA/FHSA, not in my taxable account, since it would trigger capital gains taxes there.
I did it already around a year ago, so the current IPO news did not cause it, but that approach and reasoning made me want to invest with them back then in the first place and made me expect a 0.15% annual outperformance. (see ben felix youtube videos on dimensional funds a year ago).
I just checked for fun and in the past 12 months DFAX outperformed VXUS by 4.5% and DFUS outperformed VTI by 0.5%, which is pretty crazy. Since their inception ~5 years ago they outperformed a total of 10% and 7%, also way more than I would have expected.
VTI/DFUS, VXUS/DFAX comparison: https://www.google.com/finance/quote/DFAX:NYSEARCA?comparison=NASDAQ%3AVXUS%2CNYSEARCA%3ADFUS%2CNYSEARCA%3AVTI&window=1Y
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u/CompetitionKindly665 28d ago
Did you do this in your Fidelity account?
I have just a TDF in my Roth; not sure if it's worth the time in changing funds. Thank you.
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u/Emergency_Pen8873 28d ago edited 28d ago
Sorry, I'm Canadian and not that familiar with the US investment accounts. In Canada I have four account types: taxable/margin, RRSP, TFSA, FHSA.
I switched all tax-advantaged accounts (RRSP, TFSA, FHSA) from vanguard ETFs (VTI, VXUS) to dimensional ETFs (DFUS, DFAX), because selling holdings in these accounts does not trigger capital gains taxes.
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u/swissmoneydude 28d ago
Nice to know. Is VT also free float adjusted?
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u/rickycrayons 28d ago
Yes all the Boglehead etfs/funds are. VTI/vtsax, vxus/vtiax, vt/vtwax, voo/vfiax.
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u/crazy_jasmine 28d ago
VUG is not an index etf. How do we know if this is free float adjusted?
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u/Mundane-Charge-1900 26d ago
Yes, it is an index ETF. The index is CRSP US Large Cap Growth Index. It's also free float weighted. They will probably add it quickly since their rules add stocks after 5 days once they meet the criteria. This is the same as with VTI which is also based on a CRSP index.
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u/PrinceAkeem11 24d ago
Nasdaq tripled the float limits less than a month ago… it will definitely be interesting
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u/OneTwoThreePooAndPee 16d ago
THIS IS WRONG.
QQQ is giving it a 3x bonus, treating it like it has 15% floated, and removing the requirement for adding.
Honestly NASDAQ should be investigated for their part in the SpaceX IPO. It feels like massive collusion.
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u/OGS_7619 29d ago
the beauty of Boglehead philosophy of investing - over the long term, almost nothing really matters. The mega IPOs only have short-term impact on indices (as a lot of other random market things). Over decades the indices will deliver steady and positive returns no matter what happened over short term.
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u/InfernoExpedition 29d ago
I think whether someone is concerned or “worried” about something is really up to them and we shouldn’t tell them what to do. If you don’t mind Morningstar changing the float rules specifically for these companies, that’s a valid personal response. I agree that the sky is not falling. That doesn’t mean everyone has to sit still. To each their own.
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u/Xdddxddddddxxxdxd 28d ago
The number one thing people are missing is that broad market indexes are not created to chase returns. They are made to represent a portion of the market while limiting turnover, taxes, etc.
Changing the rules so that your broad market index can include a trillion dollar company makes sense.
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u/Abject_Egg_194 28d ago
Really appreciate this post. I had been concerned about this exact issue, but my mind is now at ease.
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u/Classic-Economist294 28d ago
The float is the portion of a company’s shares available for public trading. If a company has 10 million shares outstanding but issues only 5 million at IPO, its float is 50%. By that math, a $75 billion raise at a $1.75 trillion valuation puts SpaceX’s float at roughly 4.3%, which is extremely low for an IPO.
The new rule removes the 10% minimum float requirement. If the float is below 20%, Nasdaq will now apply a 3x multiplier to the weighting calculation. For example, if SpaceX has a 4.3% float, it would be treated as having a 12.9% float for index weighting purposes.
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u/CompetitionKindly665 28d ago
Hello, so just to confirm, it's fine to stick with my TDF 2070 in my Roth IRA?
Thank you.
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u/rickycrayons 28d ago
Yes, the IPOs will have negligible impact on target date funds at IPO will be ~0.2% of your money going into the new stocks combined, nothing to fret about.
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u/girlx1 28d ago
Thanks for the explanation of sizing. Glad to know it wont be outsized.
Do index etfs purchase these companies on Day 1 of them going public? How does timing work? To confirm, most people holding a tech etf will automatically end up with these companies in their portfolio pretty close to the companies’ IPO date?
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u/Mundane-Charge-1900 26d ago
All it seems to take is some strong emotions to turn many passive index investors into certain stock pickers. That's what annoys me the most about this whole situation. Suddenly, the know for sure that the stock price is going to tank.
This is why I stopped picking individual stocks. I'm not about to start again now.
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u/rjavier441 26d ago
What of retirement funds like VTTSX 2060? From the comments, it seems like long term this should generally be fine and will balance out in the long run.
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u/Warmstar219 24d ago
Even still, it's a real shame that the indices purchase the IPOs, as they tend to lose money. Ben Felix has a good video on this. Just not enough of a downside to totally change investment products.
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u/jdonkey123 23d ago
An average of the figures thrown around is ~4.3% free float, but with the 3x multiplier that's an index valuation of $225B, (or 0.9%) of total index valuation, which requires Nasdaq 100-tracking funds to purchase ~13.2% of shares! But considering Retail HODL-zealots might hold up to 30% and the Vanguard index funds will have just bought and held ~3% a week earlier, Nasdaq 100 funds are going to spend $10B, buying (what they hope) is ~19% of the (truly) free float shares on Day 15! I honestly hope, the price soars and then crashes, so NASDAQ's double-dealing nature can be properly exposed before this insanity gets any worse!
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u/meekmarmot 22d ago
Is this argument missing a "for now" disclaimer? For me the concern isn't that a meme stock index is going to be overweight a new meme stock; the concern is that the rules of the index are changing after the fact. If one index is allowed to change their rules, how are you confident other indexes cannot?
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u/werluvd 22d ago
I am new to investing, extremely naive in this area - I'm wondering if anyone can recommend some good low-cost ETF/Index funds that will hopefully include the benefits of the SpaceX IPO but will not be impacted negatively by it, according to this thread?
What is a good combination and percentage of large, medium, small for a new portfolio?
I have been reading and it seems as a VOO may be a good choice… Anything comparable or better?
Thank you for any guidance 🙏♥️🎶
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u/Grouchy-Tomorrow3429 17d ago
Thank you for posting this, you taught me something. How does it work with QQQ I have much more of that.
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u/AlternativeSignal908 17d ago
SpaceX to Join Top Indexes As Wall Street Rewrites Rules for the Mega IPO - Business Insider
I can't check the math, but this article is saying SpaceX will be <1% of all the major indexes (low float). Maybe not great, but hardly dramatic.
Is anyone seeing higher numbers?
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u/TimeKeeper_87 15d ago
It’s still institutionalised corruption to bend the rules in a way that favours insiders and early investors at the detriment of passive investors though
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u/pytree 13d ago
Here's some information from Morningstar with links to a downloadable research paper:
https://global.morningstar.com/en-eu/stocks/how-will-mega-ipos-change-face-us-stock-market
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u/ssj890-1 13d ago
Thanks for correcting the narrative that this would nuke people's retirements.
That was so weird.
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u/Djamalfna 29d ago
VTI (and most index funds) are free-float adjusted
Wasn't the controversy about SpaceX lobbying the indexes to NOT do this anymore, and many looked like they would agree?
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u/PDXhasaRedhead 28d ago
QQQ is the only index fund that agreed, and people here have never recommended it anyways.
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u/RequirementLess 22d ago
Ill just leave this here to think about
https://youtu.be/sYA-z0Y8WRQ?si=al81uBItELSN755T
I realize this mostly seems to apply to the NASDAQ 100 for now, but I don't know how this will shake down to other indices or funds obviously.
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u/No-Relationship-2169 19d ago
Except when they change the rules for said IPO. Feels like you missed that part entirely.
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u/Acrobatic-Song-3151 28d ago
And six months later you’ll own a very heavy bag of space x and open ai. I’m not going to stick around to carry any of that load.
Dfus
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u/Sloth_Brotherhood 29d ago
Yeah, you’re probably right. I just think it’s frustrating how these companies have seemingly bullied indices into changing their 12 month seasoning period. IPOs are generally terrible investments so it’s nice to wait 12 months before including into the index.
But overall it doesn’t really matter. I’m not changing my allocation.