SpaceX is going public on Friday and Nasdaq just rewrote its rulebook to put the stock into your 401(k) whether you like it or not.
If you own a fund tracking the Nasdaq-100, you may soon own a slice of Elon Musk's rocket company... whether you chose to or not.
Historically, companies waited a full year before qualifying for inclusion. Nasdaq just cut that to 15 trading days.
S&P Global took the opposite view, voting to keep existing rules intact… companies must trade for a full year and demonstrate profitability across four consecutive quarters. So SpaceX won't qualify anytime soon.
FTSE Russell landed somewhere in between, moving to a five-day window for large-cap inclusions.
Now the better news is that because SpaceX is expected to float less than 5% of its shares at launch, and Nasdaq caps the index weight of companies in that situation.
Under the float-adjustment rules, SpaceX would initially be treated as a ~$225 billion company rather than a $1.75 trillion one, giving it an initial weight of under 1% in the Nasdaq-100.
Not enormous… but still an allocation ahead of time.
The skeptic's case is that fast-tracking mega-IPOs benefits early insiders who've held private shares for years.
Because fast index inclusion creates immediate, sustained demand the moment they want to sell… with ordinary index investors providing the exit liquidity.
Yet another reason I believe retail buying SpaceX on Friday are setting themselves up to get absolutely creamed.
Oliver
P.S.
I’ve got a much better value play coming in tomorrow’s email