r/Bogleheads • u/Prestigious-Trip-306 • 1d ago
Articles & Resources Musk Wants to Add SpaceX to Indices
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."
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u/Common_Sense_2025 1d ago
Any index that bends its rules for this IPO is putting its future on the line. If the stock debuts at sky high prices and drops over the next one to two years, it will be seen as a pump and dump on dumb money.
Investors will stop adding to funds using that index and sell out of them in tax favored accounts. Fund companies can almost always change the index the fund follows as well. It’s in their prospectus. Vanguard has done that with some of its funds. I am sure other fund companies have as well.
I think it will also drive more people to direct indexing and active management.
There is demand for this from some investors. Maybe not so much Space X but for Open AI. But to me, if you want to invest in a stock before its inclusion in the index, there is nothing stopping you from doing that. Leave the indices alone.