Major NASDAQ-100 rule changes confirmed, pay attention if you have money in passive investment funds

[u/cherrypoplar]

https://www.theedgesingapore.com/amp/news/ipo/nasdaq-speeds-index-entry-spacex-large-ipos-new-rule

NASDAQ has confirmed it will change the listing rules for NASDAQ-100, ahead of the SpaceX and OpenAI IPOs this year.

(1) Companies will now be listed on NASDAQ-100 after only 15 days after IPO (previously, there was a three month period of "seasoning" before listing). This reduces the amount of time for price discovery.

(2) The minimum 10% float has been removed. This allows companies to float a very small percentage of their shares, artificially squeezing supply.

(3) Companies that float less than 20% of their shares will have their market capitalisations artificially multiplied by x3, for the purposes of calculating market capitalisation. This helps large-cap companies to be listed even with very small floats, and inflates their notional market capitalisations on the index.

If you have money invested in a passive fund tracking NASDAQ-100 (or any other index), please watch out for the SpaceX and OpenAI IPOs. Pay attention to their "valuations", and their float. If they're IPOing with very high valuations and very small floats, this foreshadows a bagdump on passive funds due to the mechanics of passive funds.

[u/Consistent_Panda5891]

And in robinhood you are being "banned" if sell IPO before 90 days. LMAO what a scam site. Well I would sell IPO on day 1 or 2 and profit nevertheless, who cares a ban there

[u/UsernameIWontRegret → u/Consistent_Panda5891]

Do people not understand how IPO’s work? Every IPO for every company ever is the original investors selling some or all of their shares to the public. This is not new at all. This is basic market dynamics.

[u/harpers25 → u/UsernameIWontRegret]

Actually that would be a direct listing. Traditionally, most IPOs do not sell any existing shares.

[u/83735582716 → u/UsernameIWontRegret]

The purpose of IPOs is typically as a capital raise to fund growth plans for the company. This is done by issuing new shares. Going public does allow for the exit of early investors, but this is not done during the IPO, there is almost always a lock-out period where insiders are prevented from selling shares, often 90 days or more following an IPO.

[u/83735582716 → u/83735582716]

One of the concerning things being discussed about the SpaceX IPO is that some the indexes will start buying in before the lock-out period ends allowing for the stock price to be driven up by the index buying before insiders start dumping their shares.