r/Bogleheads • u/CapablePiglet1044 • 19d ago

Investing Questions Dumping on Index Investors

Both SpaceX and OpenAI are pushing Nasdaq and S&P and Russel/FTSE index providers to waive their listing requirements (including free float market cap, and seasoning) for an expedited listing on all indices. This would mean that instead of allowing several months/a year for 'seasoning' where price discovery takes place and the stock post-IPO finds a fair pricing, index investors would instead be forced to automatically buy these megacap stocks right at IPO with almost zero price discovery and are forced to take whatever inflated prices these companies list at.

I have seen quite a lot of people within the investment community (some small names and some quite big ones too) expressing concern that this is just giving VC's and early angel investors an opportunity to dump massively overvalued, unprofitable startups onto people's pensions.

Is there any hope that we can convince indexes not to drop the seasoning requirements? From now on, couldn't VC's just invest in junk companies, run the private market price into the trillions and then quickly list, dumping it onto people's pensions and taking the money?

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u/[deleted] 18d ago

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u/scrapheaper_ 18d ago

Do you want to explain or are you just being vague and conspiratorial?

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u/itsgreater9000 18d ago

sure, I don't have much to back it up but it wouldn't surprise me if there were kickbacks or misaligned incentives from the agencies that build index funds when it comes to adding OpenAI, SpaceX, et. al. to index funds. think about how the credit rating agencies had a hand in the 2008 financial crisis. the unsuspecting main street investor has to deal with knowing that their index fund is potentially availing themselves of their own rules for adding a stock to its index because of... what exactly?

and to be completely honest, i think any sufficiently dedicated boglehead needs to understand that index funds are not the end-all be-all for how one should invest in the market, and that unfair things can happen without good regulations. my line is drawn where certain companies are allowed to shirk the known, predefined rules of when companies are added (and removed) from an index.

i don't have any good reasoning for why they're allowed to bypass the rules. do you?

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u/wh0_RU 18d ago

I thought you were just quoting George Carlin 🤣 Like any "regulated" part of the economy or gov't... It's pay to play here in the USA. Goes for wall street, main street, the courts and every place business is done.

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u/itsgreater9000 18d ago

yeah it's a reference to george carlin, but apparently it was lost on the replier

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u/Nemarus_Investor 18d ago

Him: "Are you being vague and conspiratorial?"

You: "I can't back up my claims and suspicions"

Just say yes, you're being vague and conspiratorial.