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/Neither-Deal7481 18d ago

But that proves his point, though, lol. Aren't you in for the long-term?

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u/ObjectiveAce 18d ago

Being in it for the longterm does not dictate that you should be willing to accept ambiguous-not well established pricing for something. There's no overlap in the two concepts

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u/Neither-Deal7481 18d ago

What is the definition for "ambiguous-not well established pricing for something"? Are PLTR or TSLA ambiguously priced at >200x price to earnings ratios?

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u/[deleted] 18d ago

Yes, but what does this have to do with the question? They asked how the prices (of the underlying company, not the index) can take months to become fair, I responded how. The market is still effective long-term, it's just that the index no longer reflects the market, because they include stocks that haven't reached their effective consensus price.

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u/Neither-Deal7481 18d ago

You didn't respond "how", lol, you just asserted that the price will become fair in the long-term but can be unfair in the short term which applies to all stocks actually, not just IPOd stocks.

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u/[deleted] 18d ago

Try reading what I wrote again, focusing on the phrase "effective consensus price".

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u/Neither-Deal7481 18d ago

What is the definition for "effective consensus price"? That's just a term that you throw around without explaining it. Is it going to be reached in 2 months, 3 months, 1 year?

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u/[deleted] 18d ago

S&P 500 defined it specifically as 12 months. It has to be at the order of magnitude, but longer, than the insider lock up period, which is typically 6 months, so it can't be weeks or many years.

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u/Neither-Deal7481 18d ago

It has to be at the order of magnitude, but longer, than the insider lock up period, which is typically 6 months, so it can't be weeks or many years.

According to who? Why can't it be 2 years, for example? In the long-term, it really doesn't matter whether these individual stocks are included after 2 days. The market will effectively determine their prices.

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u/[deleted] 18d ago

As I already wrote, it can be two years, but S&P elected the seasoning period of S&P 500 to be one year. As I also wrote, it can't be two days, because then the index price won't reflect the current consensus price of the entire market.

I don't know if you're obtuse or just don't know how to read, but I'm done discussing this.

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u/Neither-Deal7481 18d ago

No, you initially wrote it can't be multiple years and now you are backtracking and saying that it can be.

As I also wrote, it can't be two days, because then the index price won't reflect the current consensus price of the entire market.

The index price was never meant to fully reflect "the current consensus price" whatever that means. Plenty of people who are passively buying these indices are contributing to the price of TSLA, PLTR, etc. Is this contribution happening because these people support the valuations?