Elon Musk’s rocket, satellite, and AI company SpaceX is expected to go public this month in what could be the largest IPO in history.
The company is reportedly targeting a valuation of nearly $1.8 trillion and could raise about $75 billion when it lists on the Nasdaq. If it reaches that valuation, SpaceX would instantly become one of the most valuable companies in the world.
And Wall Street is already bending its rules to give the rocket/AI/social media company a boost.
Several major stock market index providers, including Nasdaq and FTSE Russell, have recently changed or adopted fast-entry rules that could allow companies like SpaceX to be added to major indexes much sooner than they typically would. Nasdaq’s new rule could allow SpaceX to join the Nasdaq-100 after 15 trading days, while FTSE Russell’s new rule could make the company eligible for some of its indexes after just five trading days.
This could have major implications for millions of investors.
Indexes are basically benchmarks that track a specific subset of the stock market. The most well-known is the S&P 500, which tracks 500 of the largest publicly traded companies in the United States.
Many index funds and exchange-traded funds (ETFs) hold stocks that mirror these benchmarks in an effort to replicate their performance. These funds are a key part of many 401(k)s, pension funds, and retirement accounts.
So if SpaceX gets added to major indexes shortly after its IPO, funds that track those indexes may have to buy SpaceX shares. As a result, regular people could end up with exposure to Musk’s currently unprofitable company through their retirement accounts even if they never intentionally bought the stock themselves.
That is a huge shift from how IPOs have traditionally been handled by indexes over the past two decades.
After the dot-com crash, index administrators started putting guardrails in place before newly public companies could be added to major indexes. Those rules often required a company to trade publicly for a certain amount of time and show a track record of profitability before being included.
For instance, Tesla was public for about 10 years before it was added to the S&P 500.
The idea was to give stocks time to settle after the typically volatile post-IPO trading period, instead of going all-in amid IPO hype.
But now, with SpaceX expected to become one of the largest public companies almost overnight, index providers don’t want to look out of touch.
“Indexing is about capturing the largest and most liquid securities that represent public markets,” Brian Hartigan, the global head of ETFs and index investments at Invesco, told Bloomberg.
Even the S&P Dow Jones Indices, which oversees the S&P 500, has reportedly been weighing changes to its rules.
Not everyone is thrilled about this.
“From our perspective, market integrity is not something that is a competitive dynamic,” NYSE Group President Lynn Martin recently said on Bloomberg TV.
The backlash has also spilled onto social media.
“The richest guy on the planet is about to rob your 401K. 👍,” Zack Nelson, a prominent tech YouTuber, wrote on Elon Musk’s X.
“Listen, I’m a big ‘the index is the index’ guy, but they are openly looting the coffers. This is 100% fraud,” posted Ian McMillan, a market technician at Adaptiv.
SpaceX did not immediately respond to a request for comment.
