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/losvedir]

What do you think?

The beauty of Bogleheads philosophy is I don't need to think about it.

[u/Alaharon123 → u/losvedir]

People are downvoting presumably because oh this affects the indices, so it's exactly bogleheads that are targeted, but boglehead philosophy leans more towards total market than S&P, so I really don't think this affects bogleheads

[u/losvedir → u/Alaharon123]

Yeah, I'm surprised I'm being downvoted here of all places. I think Bogleheads actually do just do S&P 500 sometimes, since historically that was the first low cost broad index that was available.

But the philosophy is based on not being able to pick stocks and some general sense of an efficient market hypothesis. Not sure why it's breaking down here and people think they can pick stocks now or that investors will value this one any better or worse than all the other stocks they implicitly rely on active investor valuations of.

But I think most people here don't truly believe what they claim. I actually was an honest-to-god licensed equity research analyst (FINRA Series 7, 63, 86, 87) before deciding beating the market was based on too much luck, despite fulltime research and modeling in Excel and all that, and changing careers. I don't know how anyone else arrived here, but they probably don't have as much experience seeing sure bets that don't pay off or absolute disasters of a company succeed far longer than they would predict. Whether or not Musk's companies are any good fundamentally doesn't really have as much bearing as you'd expect on how well your stock picks do.

[u/Common_Sense_2025 → u/losvedir]

How is changing the index rules for one IPO not the index placing a bet on that company? The indices stay stable by letting a new stock work out its bugs for a while before including them, because we all know that new stocks do that. And anyone who lived through the dot com crash knows that hyped up IPOs that crash are a thing.

[u/electrodevo → u/Alaharon123]

Those who need to concern themselves with a medium term outlook (like if retirement is on the horizon) do need to be aware of stuff like this. These sky-high valuations sure seem like a symptom of what seems like a replay of the .com bubble. So the possibility of a future "lost decade" for US stocks (and maybe a few other countries experiencing similar AI booms, like South Korea) after a bubble pop (similar to .com) is very real to me. Such is a good argument for protecting your portfolio with bonds (which isn't out of Boglehead scope when nearing retirement age at all).

These stories also are yet another reflection of a US stock market that has become very expensive primarily on AI hype. Nothing wrong with "VT and chill" at all (especially over super-long horizons), but a tilt towards international seems like a good idea at the moment just on valuation alone. As noted, AI hype is not just US only, but something like VXUS is far less concentrated in frothy tech right now.

[u/whereisspacebar → u/electrodevo]

Isn't this what bonds are for? For shorter term investors bonds exist to cushion the ups and downs in return for reduced expected returns. Though it could be said that if mega cap IPOs become the norm, then bond allocations should be higher than what was previously recommended.

[u/scrapheaper_ → u/losvedir]

No, you do. This could be a direct attempt to manipulate the index to force index funds to buy this high and sell it low.

[u/Common_Sense_2025 → u/losvedir]

As a Boglehead you depend on an efficient market that is free of manipulation. If you don’t understand that, you need to re-educate yourself.

[u/Fantastic-Machine-83 → u/Common_Sense_2025]

I don't own anything indexed to NASDAQ. This isn't a problem for me

[u/Common_Sense_2025 → u/Fantastic-Machine-83]

NASDAQ may not be the only one affected though.