Posted by maltalex 15 hours ago
The risk S&P takes by doing this is that they will still be forced to buy SpaceX, but a year after everybody else. Given that there is a massive amount of capital that you know will have to buy this stock in 12 months, that itself provides speculative reasons to buy it now.
The indices are in an unenviable position: a race to the bottom. The S&P 500 may be setting up its index funds simply to be the last buyer in a Ponzi scheme.
There is no guarantee that the market will find the “true value“ of SpaceX in the 12 month interval. Markets are frothy and speculative already, and they now have a built in exit liquidity provider.
S&P may very well end up buying SpaceX, but it will be through the standard mechanism they have been using for decades. Not in a last second bum-rush deal that NASDAQ made to grant special favors.
One year from IPO, the insider lock-up periods will have expired, so insiders who want to get out will have had an opportunity to dump their shares in a risk-based approach without a guaranteed payout from index funds.
But I assume at least it's based on the free-float market cap?
Previously: "SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P" - https://news.ycombinator.com/item?id=48405718
NASDAQ has an incentive to offer early entry into the index (they want SpaceX to list on their exchange), whereas S&P has no incentive for early inclusion; it could only increase risk for them. Even if they /wanted/ to add SpaceX early, that could create a precedent with unpredictable consequences.
Since most shareholders I know plan to hold for another 20 years, waiting a year to get into the S&P average seems fine. Congratulations to S&P for sticking to principle.
squints
Is that an institution working for long-term stability instead of short-term gain?
looks through binoculars
Holy hell... it is!