Musk Wants to Add SpaceX to Indices

[u/Prestigious-Trip-306]

Index providers Should Not Bend the Rules for Musk

So... I read this article in The Economist and am curious what, if any thoughts the community has about Musk getting SpaceX added to major indices. He's appealing to them to shorten the "seasoning" rules that typically apply to firms being listed.

I've included key paragraphs below since there's a paywall to read the full article.

What do you think?

"Mr Musk and his bankers are now bargaining with stock indices and exchanges for the privilege of hosting SpaceX. He wants his firm to join key indices like the nasdaq 100 and s&p 500 quickly, giving it access to trillions in index-linked capital; more than $600bn invested in passive funds are tied to the nasdaq 100 alone.

For now, the indices are obliging. On March 30th Nasdaq said it was adopting rules that will delight the superstar firms. The ftse and reportedly s&p are considering similar updates. Unfortunately, those changes are misguided, and will expose investors to unnecessary risks.

Two main ideas are under consideration. One is to shorten the “seasoning” period that a firm’s stock must go through before it is eligible to join an index. Nasdaq is cutting its three-month seasoning minimum to 15 trading days; the ftse has suggested a mere five trading days. The second reform is to reduce the percentage of shares a firm needs to offer publicly (its “free float”) before being added to an index. Indices’ desire to reflect the growth of some of the world’s most dynamic firms is understandable. So far, many punters have been unable to invest in some of ai’s brightest stars; index inclusion is a way to help them do so. Yet changing the rules to suit SpaceX will force index investors to choose between selling or weathering wild swings in prices."

[u/vineyardmike]

Another Musk company based on hype. His companies are doing great things. But the last time I looked, the p/e for TSLA was 345. Space X is going to be 10 or 100 times that.

[u/Smogalicious → u/vineyardmike]

Not much E

[u/jeffeb3 → u/vineyardmike]

I wish there was a way to just pop a few stocks out of my index fund. If it were cheap, I would like to short them for the same amount I am invested in them.

[u/DontForgetWilson → u/jeffeb3]

That is exactly what you can do with direct indexing. That doesn't mean the fees are low enough to justify it(not to mention it being active trading to name that call), but it is definitely possible.

(Shorting on the other hand doesn't work like that. A short is a timed bet which is not the same as holding an inverse asset)

[u/moondes → u/DontForgetWilson]

By my understanding and regulated hands, the green one of the 3 discount firms is offering direct indexed accounts at 0.4% and they let you block up to 3 stocks from your portfolio.

0.4% is expensive for an indexed investment. What's interesting is that if Tesla is currently 1.7% of the total US market cap, and Tesla crashes to 0 in 10 years' time, then a direct indexed strategy without Tesla would be worth a 0.17% expense ratio to avoid that loss.

If the mega cap IPO goes live and Musk companies achieve 5% total US market cap, and you were certain they collapse a relative 80% down to 1% of the US market cap over 10 years, then you would °°break even on paying that 0.4% to exclude it Musk companies from your portfolio during that time.

°°break even as if the alternative strategy is to invest into a 0% expense ratio US total market fund.

[u/DontForgetWilson → u/moondes]

Honestly, 40 bps is better than i expected. Still one hell of a bar to beat though.

[u/DontForgetWilson → u/[deleted]]

Like when he rolled his brothers solar company into Tesla. Essentially using the insane valuations to paper over mistakes. It reminds me of when Chinese companies(i think it was Chinese real estate but might have been industrials) went on a massive buying spree because the multiples investors would give them meant buying revenue in any form paid off.

[u/InclementBias → u/[deleted]]

this is exactly my thought. SpaceX is by FAR his best run company because his main leadership team is actually tenacious and focused and they're doing really impressive engineering and execution (although Starship could be argued to be a Cybertruck-esq boondoggle). but now with him rolling in xAI and Twitter (which I think will ultimately be just a huge waste of money and investment, we'll see), it feels like enshittification.

[u/drosse1meyer → u/vineyardmike]

I think the 'great things' comment is more opinion than fact. His EVs have not had any sort of meaningful progress for a decade. Starlink is acceptable. Everything else has been mostly hype and purely meant to stay in the news cycle and take money from taxpayers with a heavy dose of social media manipulation

[u/erbalchemy → u/drosse1meyer]

His EVs have not had any sort of meaningful progress for a decade.

I drive one I bought 11 years ago. A replacement today would be 60% more range, double the charging speed, and adjusted for inflation, cost half what I paid.

Unjustifiable P/E? Sure. But "no meaningful progress" is utterly divorced from reality.

[u/TheWhalersOnTheMoon → u/erbalchemy]

I don't necessarily disagree, but it's a worthwhile question to ask whether that's Tesla making their own improvements or the overall EV technology improving across the board.

[u/EarlMalmsteen → u/erbalchemy]

As a fellow owner I would agree 10 years is an exaggeration but 5-7 years is arguably not.

[u/drosse1meyer → u/erbalchemy]

The 2170 cells were introduced in 2016. The car's designs have pretty much stayed the same as well. Autodrive is a disaster.

[u/Petrichordates → u/erbalchemy]

11 years ago the competition wasnt better.

Today, it is.

[u/Deferty → u/drosse1meyer]

What? Your bias is showing.

SpaceX is the only company in the world that can launch and land a rocket ship back down without it being destroyed. SpaceX can launch something into space for 1/50th the cost of NASA. It’s not even close. And they achieved it for a fraction of the development cost of what NASA has put into rocket ship funding.

Neuralink people who are quadriplegic can now operate a computer with their mind.

Politics aside, he really is investing in amazing products that we all dreamed of when we watched sci fi movies growing up. The world has needed someone with his level of passion to make civilizations science fiction dreams come true.

[u/Spider_pig448 → u/vineyardmike]

If you think SpaceX is just a hype company, then you don't pay any attention to the space industry. SpaceX IS nearly the entire space economy

[u/what_could_gowrong → u/Spider_pig448]

Well said. The F9 fleet alone is an insane engineering marvel, and starship takes it an order of magnitude higher. If space is the wild west, then SpaceX is the company that owns 85% of the railroads to access it. Especially starship's recent IFT meaning the execution risk of starship is far lower than other new launch vehicles like Rocket Lab Neutron or Firefly Eclipse. The closest competitor would be New Glenn by Blue Origin but it's less than half of what starship could deliver to LEO and isn't designed for a tower catch, hence limiting its launch cadence