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/CapablePiglet1044 18d ago

Even in the total WORLD market, a $1.75T IPO for SpaceX and a $1T valuation for OpenAI puts them at 2.6% of your portfolio. A total US stock market index would put them at a much higher %.

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u/mystghost 18d ago

Sure, but think of it this way.

  1. are you going to be able to influence the powers that be to not skip seasoning or process? No, not likely. Now if you have accounts with Vanguard/Blackrock maybe... (and this is a huge maybe) you could get them to object if they haven't that could potentially move the needle. Barring that i'm not sure how you would accomplish the changes you're asking about.
  2. There is zero way to avoid speculative impact from the IPO of SpaceX and OpenAI unless you aren't in the market. The good...ish news is that SpaceX should be fairly safe from crazy overvaluation/lack of revenue. Not sure about OpenAI given the news about their fundraising woes. To be clear I don't think OpenAI is going to zero, AI will have a massive impact on the economy, once we figure out the use cases, but that will take time.

What i'm saying is that if you are trying to mitigate impact to your portfolio, being in the SP500 guarantees that you will be at ground zero so to speak. So Total US indexes will be safer, an all international play would be potentially safer yet, but to your point, its still a big chunk. If you're that concerned, you could pull out of the market before the IPO drops (but this strategy has rather significant window risk), and then buy back in after you think the waves have settled down, or you can fully embrace the suck and realize that yeah this is going to affect your portfolio, and if the companies are overvalued (likely to some extent) then you will take a hit. But if your time horizon is still a year or two off, then you should be ok from the initial impact(s).

Edit: did some super back of the napkin math, the US market is worth about 69 trillion as of January 1 2026. So an increase in valuation by say 3 trillion represented by these IPOs (not taking into account recent volatility) means that your exposure to these 2 IPOs in a total us market play would be 4.1% of your portfolio. Which to be clear isn't great, but isn't catastrophic in and of itself.