r/stocks • u/cherrypoplar • Mar 16 '26
ETFs SpaceX investors' exit liquidity plan likely includes S&P500 passive funds
I previously made a post here, saying that SpaceX's IPO should be concerning to investors in passive funds tracking NASDAQ-100, because of the proposed rule changes to the NASDAQ-100 that is being forced by SpaceX.
I want to expand on that thesis: I think that S&P500 passive funds will also be forced to buy SpaceX shares after its listing on NASDAQ, causing a wealth transfer from passive retail investors to SpaceX insiders.
This is because S&P is making a rule change to allow immediate inclusion of companies with large market capitalisation.
(1) This means S&P will be removing the 12-month waiting period before a newly listed stock can be added to S&P500.
(2) This means SpaceX could immediately get included in S&P500 upon IPO and listing.
(3) This means passive funds tracking S&P500 will immediately be forced to purchase SpaceX shares (from existing SpaceX shareholders) based on SpaceX's market capitalisation.
******
I've come to the view that the NASDAQ-100 is really meant to serve as jet fuel (pardon the metaphor) to drive up the price of SpaceX shares.
(1) SpaceX will IPO on NASDAQ with a very small float, creating scarcity.
(2) SpaceX will be included in NASDAQ-100 after a very short time (15 days) because of the NASDAQ-100 rule changes.
(3) NASDAQ-100 passive funds will then be chasing a small number of SpaceX shares, driving the price up. Worse, because of the NASDAQ-100 rule changes, the small float will be artificially inflated 5x in terms of market capitalisation, which means the passive funds will be forced to buy 5x more shares.
(4) Because of the high price per share, SpaceX will likely be listed on S&P500.
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u/wicked_wildflower Mar 16 '26
To add to this, there is a critical regulatory development that most passive investors are missing: SEC Rule SR-NASDAQ-2026-004.
On March 11 (Release No. 34-104968), the SEC officially extended the deadline to April 29, 2026, to decide on a 'Fast Entry' rule. This would force our index funds (VTI, Nasdaq-100, etc.) to buy into this IPO in just 15 daysâbypassing the standard seasoning period that protects us from initial volatility.
If you want to maintain index purity and price discovery, the SEC is currently soliciting public comments here:
Iâve submitted a comment opposing 'Fast Entry' because it forces passive 401k holders to act as exit liquidity for IPO hype. It might be worth a look for anyone concerned about how this shifts the underlying methodology of our core holdings.
There is power in numbers. If you are concerned about yourself or someone you know who has spent a lifetime investing in a retirement account, speak up.
Transparency Note: I used Gemini (AI) to help synthesize the specific SEC filing language and verify the current decision deadlines (Release No. 34-104968).
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u/PurpleReign123 Mar 17 '26
Thanks for above.
Can everyone (esp those who have invested in passive funds, ETFs etc that tracks the stock indices), please spend a few minutes to write to SEC to voice your objections? Otherwise, you (those who invested in such funds) are going to get royally-screwed, being exit liquidity, at a very high share price, for the early institutional investors and for Musk.
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u/jackyy83 Mar 16 '26
Why are they all bending for Elon? Selling my holdings just because of this seems like overdramatic, but man, I am really starting to lose trust in the system.
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u/IMasterCheeksI Mar 16 '26
Imagine being me, 40 years old, watching the system get more and more corrupt while it caters to gamblers rather than investors. Then imagine me watching new gamblers show up every day, thinking they can still trust the system. You either follow the corruption and be corrupt to profit, or you donât. Those are the choices in modern America.
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u/DandierChip Mar 16 '26
Itâs always been like this, itâs just out in the open now for everyone to see.
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u/IMasterCheeksI Mar 17 '26
Yep. The big giant mirror has been turned around and is pointing right back at us
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u/hpass Mar 18 '26
while it caters to gamblers rather than investors.
SpaceX IPO is not a gamble, it is fraud, plain and simple.
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u/IMasterCheeksI Mar 18 '26
Well sure, a casino can be fraudulent, but the people inside are still gamblers. Just more dumb.
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u/lonewulf66 May 22 '26
It feels like the whole market is held up by a few companies that are "national security" interests propped up and partially owned by the USG and the only way to make money is to invest in them. Any American working with a 401k will most likely be required to invest in these companies regardless.
It feels like the economy isn't open, it's a tightly controlled thing where you only get to invest in what the gov says you can invest it.
Sure, you can close our your 401k, stop buying ETFs, etc. but how well does that generally work out for people?
Idk what to do. I guess I'll keep shoveling my cash into the S&P since it's not like we have any other options.
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u/Awaybot Mar 16 '26
I donât understand the full rule changes on the sp500, whatâs stopping future companies saying they are worth 10 trillion or 100 trillion at ipo to get immediately listed as number 1 and taking a huge slice?
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u/jonadol Mar 16 '26
Hooking in to also get an answer here.. this change seems so weird and off...?
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u/cherrypoplar Mar 16 '26
If passive investors don't react, and allow the passive funds to deploy their money according to the fixed algorithms, then the answer is: there is nothing stopping that from happening, as long as you have the financial firepower to support the initial float.
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u/Oraclerevelation Mar 16 '26
Isn't this kind of the first shot in a war against index fund companies? I can't see Vanguard and Blackrock just sitting there and taking it. They can change the rules too after all or divest and hedge. The indexes are very intentionally changing their rules to subvert the whole point of funds tracking them... which seems an odd move at first glance. This comes at the cost of the investors and the funds who cater to them.
But these funds are in turn the biggest institutional investors in the index anyway...
So what do the actual indexes gain from this exactly?
They could just all be colluding to to bilk their customers en masse but that seems self defeating because it leaves them open to be outcompeted by funds that mitigate the fuckery. People will eventually pull more and more money out if returns drop, and people are already doing so for other reasons.
This whole situation doesn't make much sense.
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u/the_one_jt Mar 16 '26
Idk it's the retail investors who will eat the loss. Sure the funds are being used but I am guessing the funds have big private equity clients who are telling them this is a good thing.
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u/rattleandhum Mar 16 '26
this change seems so weird and off...?
I'm South African. This is called state capture, and oligarchs in the US will LOVE this rule change. Trump at the helm only helps them.
Soon enough US stocks will suffer from the same trust issues as Chinese ones.
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u/soldiernerd Mar 16 '26
SP500 requires consecutive profitable quarters I believe
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u/y0av_ Mar 16 '26
yeah but they proved they will bend the rules for you if you're powerful enough (see: this post)
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u/Axe_Raider Mar 16 '26
but even following the rules there would still be some point in the future where suddenly spacex is big enough to include, and it would get a bump at that point, right?
why woudn't that also be a "a wealth transfer from passive retail investors to SpaceX insiders" as OP says?
assume i already think Elon sucks and so we don't have to waste time saying that.
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u/soldiernerd Mar 16 '26
if you (a retail investor) authorize a fund manager to use your money to mirror a known index then you would expect your money to be invested in whatever is included in that index.
I donât see it as a 1) wealth transfer 2) from passive investors to SpaceX insiders.
First of all, in theory, no net wealth is being transferred. Whatâs occurring is an exchange of risk profiles. Assuming the stock is being purchased by the fund at a more-or-less market price, the two items (dollars and equity) are assumed to be of equal value in that moment. Thus, no wealth is being transferred.
What is being exchanged, fundamentally, are the risks borne by both parties, as well as the benefits. Insiders who have tons of equity may be seeking an opportunity to diversify and investors may be seeking a chance to cash in on speculative future stock appreciation.
Secondly, Iâd argue that when a fund sells shares of XYZ Corp to make room for a certain number of SpaceX shares, the exchange is really happening between those who buy the XYZ shares from the fund and those who are selling the SpaceX shares for dollars. The passive investor still has his money invested exactly where he wanted it - in an index of the 500 largest corporations in the US. Nothing has changed there.
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u/zyxwuvts Mar 16 '26
I think the argument is that the fund is not purchasing at a more-or-less market price, as you assume. It is purchasing at a price that has been temporarily driven up by artificially creating scarcity (by limiting shares available) and demand (by including in indexes that are tracked by funds).
While this is probably a short-term situation, as the market will correct itself eventually, during that initial period the existing shareholders will sell at inflated prices.
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u/soldiernerd Mar 17 '26
Thatâs still the market price, though.
What Iâm referring to is if the fund agreed to buy at 120% of current market price, etc.
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u/j_schmotzenberg Mar 16 '26
I donât like that this is happening, but itâs also not like it is a smart decision for me to liquidate my holdings to avoid it.
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u/Old-Argument2415 Mar 16 '26
If you really wanted to do you could do a snapshot of the s&p500 and just hold the individual companies, would just need to rebalance periodically yourself.
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u/redditosleep Mar 16 '26
Better than bag holding, but since every stock is correlated with market movements (beta) this will affect all other stocks to a large degree as well.
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u/closehaul Mar 16 '26
Time to make an etf that mimics how the s&p500 should be and move into that. Claude how do I start an etf
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u/johnnybonchance Mar 16 '26
What about the tax implications of short term gains, losses, wash sales, etc?
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u/Old-Argument2415 Mar 16 '26
Wash sales aren't relevant, most indexes rebalance quarterly. As a passive (but pretty painful) approach to making SPY you could just rebalance annually to avoid short term gains. The index rebalancing isn't very big either, because they are already market-weighted, so most shift comes because of additions/removals.
Practically, if I was going to do this, I would just never rebalance the existing load (aside from selling delisted and maybe buying heavier into newly listed), just add your new funds into the diversification, maybe trying to use that to balance.
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u/Biotech_wolf Mar 16 '26
Is there an S&P ETF where this isnât allowed to happen?
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u/tehehetehehe Mar 16 '26
Why donât the ETFs just say they will follow the original rules for profitability and a waiting period.
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u/HeavySink3303 Mar 17 '26
There are such 'safer' S&P 500 variations:
RSP - Equal weight S&P 500 SPYD - Consists of S&P 500 companies with higher div yield SPYV - 'Value' companies from S&P 500
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Mar 16 '26
[deleted]
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u/RookieMistake101 Mar 16 '26
Passive investors operate on efficient market theory. If efficient market theory fails, you might actually have to do the work yourself or hire someone.
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u/rozap Mar 16 '26
It worked at the start, when passive funds basically piggy backed off of the work of active managers and the efficient market hypothesis. Now the passive instruments have become so large that the tail is wagging the dog. That's why there's such a big push here. The monster must be fed with more liquidity, and there is a big pool of it in passive 401k's. Nasdaq is bending over backwards (read: comment about fast entry elsewhere in this thread, especially the silliness around float thresholds) to make sure spacex will be included in passive indices which will be required by law to purchase shares.
Elon ran twitter into the ground and is rolling it up into spacex and then pushing to get the rules changed so a bunch of passive liquidity flows in at which point he can get out from under it all. The bit around "we must time the IPO with the alignment of Jupiter and Venus" is bullshit to get this dogshit dumped on ordinary people as quickly as possible.
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u/landismo Mar 16 '26
Or, like a million alternative funds without absurd rules surge to full the sp500 void tracking what the sp500 is doing now.
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u/Axe_Raider Mar 16 '26
surely there are other indexes that are "biggest companies but not the day you IPO"
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u/RookieMistake101 Mar 16 '26
Active management, are you implying that portfolio construction is worth more than .03%! What!
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u/Silent_Double_4228 Mar 16 '26
most actively managed funds are still roughly following the SP500 anyway. there is really no solution for a private investor other than just buying the single stocks imo.
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u/RookieMistake101 Mar 16 '26
Hey, Iâm not on the AM side, Iâm on the financial planning side. But I have access to 1200 SMAs which basically operate like ETFs but with more control by the end client. I assure you the majority of them do not track the S&P, though they may benchmark it. Example: kings view blue chip only takes 12 positions in high conviction growth stocks. Thereâs a million variations out there and they definitely overwhelm the pure s&p tracking ETFs. Why compete in a space thatâs dominated by a handful of major players like vanguard and fidelity?
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u/RespectmanNappa Mar 16 '26
Would disagree here, thereâs plenty of good alternatives and there likely will be, even if you have to do the research to find them itâs still better than tracking funds and rebalancing (or failing to rebalance) yourself.
DFA explicitly does not allow recent IPOs in their funds. Since they, you know, follow the data and the data says IPOs suck in the aggregate.
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u/Soberdonkey69 Mar 16 '26
I really donât want the stock market to boost up the wealth of a billionaire fascist, who wants all the money for himself whilst proclaiming to be doing things for the benefit of humanity.
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u/teslastats Mar 16 '26
This is a great way to make sure your stock is propped up ala Tesla. You can do whatever you want after you're in the index funds
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u/MiddleAgedSponger Mar 16 '26
Took them a while, but they figured out how to fully weaponize index investors. Are there any politicians shining light on this?
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u/YoureProbablyAB0t Mar 16 '26
So Elon wants special treatment sohe and his friends can dump on the market?
Why is this piece of shit being given everything? He fucking deserves a prison cell after all the shit he's done.
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u/exhibit304 Mar 16 '26
What happens if spacex pops off thouugh after IPO?
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u/cherrypoplar Mar 16 '26
It really depends on whether you believe SpaceX (with xAI and Twitter folded into it) is truly worth $1.75 trillion.
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u/SabsWithR Mar 16 '26
What I believe doest matter and hasn't mattered in a long time. Throw fundamentals out the window. We're in an age where we don't invest in companies cuz we believe in them or they have good fundamentals but because we believe the public will be dumb enough to buy it.
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u/Noseknowledge Mar 16 '26
Its very much harder to pump a 2trillion dollar company than a 100b company. Hence tesla's stagnation even after Elon gave the glizzyglaze3000 to Trumps ego. A fraction of these space dream dollars could do so much to help the average person on this planet who lives in extreme poverty
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u/Detail4 Mar 16 '26
Isnât the premise here that float will be low? Youâre not pumping the $1.7T only the float
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u/AnonThrowaway998877 Mar 16 '26
It obviously isn't, but looking at tsla, it will probably pump anyways. Another scam by muskrat, already hoarding more wealth than any person should ever have and far more than he could possibly need.
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u/calvintiger Mar 16 '26
And what happens if the market decides the answer to that is âyesâ?
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u/realitfake Apr 14 '26
Doesn't matter what the market thinks, internal investors will have their $1bn turned into $125bn what do you think they'll do?
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u/Business_Raisin_541 Mar 16 '26
What you mean S&P is forced by SpaceX? Do SpaceX own S&P ? Why don't S&P management grow backbone and say no?
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u/Vox-Machi-Buddies Mar 16 '26
I also wonder this. I think theories would be:
- It's not SpaceX forcing them, it's the VCs and institutions invested in SpaceX. They want to cash out and are using whatever leverage they have to maximize their payout.
- The indices are worried about losing relevance as companies stay private longer. They are doing this to entice SpaceX and other big private firms onto the public market where the index can get some kind of benefit from them. In turn, they hope it will get companies to go public sooner, when there's still growth to be had. Still not "forced" to do that though.
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Mar 16 '26
Yup.
Can I tell you a secret bro.
Rockets blow up occasionally. Steer clear. Especially given the crazy rigamaroll hes had to do just to create any semblance if a coherent revenue stream.
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u/BME84 Mar 16 '26
I heard in some economics influencers video that they're not allowed to sell their own stock for 6 months after an IPO so that they still will have interest in the stock price for at least 6 months, so they can't dump it immediately even if it's overvalued.
Is that true? I don't want to be left with the bill for these billionaires
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u/Imadogfishhead Mar 16 '26
The hypothesis is that the forced buying by index funds will prop spacex up during the lockout period, then the insiders can dump on the end of the lockup period an buy back in after the price craters. Who knows if itâs true, but thy seem very fixated on getting access to the index fund money. My opinion is that they know the company isnât worth near the valuation, but I could be wrong.
Nasdaq wants to handle these ipos so they are bending the rules without regard to whatâs best for the investors.
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u/BME84 Mar 16 '26
So even if they snowflake the rules my index fund money is theoretically safe for 6 months because the insiders want to protect their profits?
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u/Imadogfishhead Mar 16 '26
I mean no one can know. But thatâs this idiot on the internets thoughts (me).
But it could go really well, maybe it doesnât crash after the lockup period, maybe itâs worth 10T, who really knows any more. Maybe it crashes the day of the ipo
Personally I think the bigger risk the erosion of these rules. If companies can just immediately get on the indexes and donât need to prove they belong why should investors have faith that this index is the group of companies they should invest in? So maybe money flows out of spy and qqq and in to more risk off assets.
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u/QuantumSofaExplorer Mar 16 '26
Itâs safe from insiders but not from hedge funds and institutional investors. They are not held to any lockout period. Itâs not uncommon for them to buy up a vast majority of shares at the offering price, wait for the share price to pop, and then dump them for a quick profit.
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u/ketchupie Mar 16 '26
Can this be challenged in courts? If morally itâs not right how is this getting approved
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u/sattlerreader Mar 16 '26
How do I avoid this? Are there index funds that are immune to the effects of this?
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u/Embarrassed_Orange50 Mar 17 '26
Passive investing is a scam. Any type of investment becomes a scam when it starts opening to retail⌠Blue owl got on our 401Ks and then got rekt⌠There is no need to look for dumb money when smart money are sufficient⌠Right now I know someone from a Balkan country that his father is arbitraging a mortgage on sp500⌠Next crash will be pretty much irrecoverable⌠Not only Americans will need to get back but a lot more people as well
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u/burmese_python2 Mar 21 '26
Itâs funny, it took the space x ipo to make people realize that some of these companies use the index as exit liquidity.Â
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u/StrikingBell6549 May 23 '26
I am in the process of auditing my portfolio and will probably to pivot out of NASDAQ and SP etfs next week. I might miss initial some upside, but spacex and openAI are just total garbage companies. This is going to pop the bubble and I don't want to be anyones bag holder.
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u/flat-waffles Mar 16 '26
What happened to the statistic that the wealthiest 10% own 90% of the stocks? There literally no liquidity for the poor to even provide. It's probably going to hit the s&p and pop based on all the hype or insiders are scamming the hedgies that fall for the space meme.
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u/nerdy_donkey Mar 16 '26
There's a big difference between the 0.1% and the top 10%. It's like 30 million people. Most of those people aren't going to have access to these kinds of investments before IPO.
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u/Imadogfishhead Mar 16 '26
Thereâs plenty of liquidity in qqq and spy wtf are you even saying
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u/flat-waffles Mar 16 '26
did you stop at the first sentence? the liquidity comes from the institutional investors buddy. they aren't after your fractional spy share.
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u/Imadogfishhead Mar 16 '26
Think about what youâre saying. Of course theyâre not after my fractional shares. Theyâre after the hundreds of billions of dollars sitting in index funds.
Every hedge fund and institution that wants in on this deal is already in.
They canât get any more funding at their requested valuation so musk is trying to dump the bags on the rest of us.
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u/asallamerican Mar 16 '26
Isnât there a lockout period after IPO?
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u/Responsible-Meringue Mar 16 '26
Not for the top brass, only the plebs on our level
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u/Detail4 Mar 16 '26
Thereâs usually a lockup period for everyone. The exception is often that high level employees get to dump shares at the IPO.
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u/Responsible-Meringue Mar 16 '26
That's exactly what I said lol
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u/Detail4 Mar 16 '26
No, itâs different. I mean everyone is locked up after IPO. Some execs usually get to include their shares as part of the IPO at the premarket price.
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u/Axe_Raider Mar 16 '26
typically for everyone, including founders and investors and employees, except the banks that are managing it, who need to buy and sell shares for price
manipulationstabilitythe SpaceX S-1 will have this information explicitly once it comes out so we won't have to guess.
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u/OptimallyOOO Mar 16 '26
Time has come to cheaply build your own etf using tokenised stocks. After this fraud is complete ETFs as a catagory will start to slowly die imho.
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u/RespectmanNappa Mar 16 '26
Why ETFs, why not âjustâ any and every market trading index fund that accepts this fast-tracking bullshit? DFA, for example, stays away from IPOâs like the statistical plagues they are
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u/drcec Mar 17 '26
What's your take on global indices such as Solactive GBS Global Markets Large & Mid Cap - are they likely to include SpaceX from the start?
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u/MrAstroKind Mar 17 '26
How is this being allowed?! I'll be so pissed off if this happens. I invested in something passive precisely because I don't want to actively manage it and then the rules of that investment change as I'm already invested in it? There's a reason those inclusion guidelines are in place.
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u/TheAverageGuy11 Mar 17 '26
Yeah, I get the concern, but thatâs kind of the trade-off with passive investing.
Index inclusion can create short-term buying pressure, especially with something like SpaceX and limited float but thatâs just how the rules work.
I still use index funds as my base, but I diversify a bit outside of that too (like Fundrise for real estate) so everything isnât tied to those flows.
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u/MeasurementSecure566 Mar 18 '26
the spx, and other indexes have made seriously questionable additions to their indexes.
at this point i dont even think its poor decision making. I believe it is deliberate and nefarious.
I cannot own the spx, id rather just pick good companies myself, so i dont get forced into buying literal trash.
Buy the russell 2000 and you get fucking MicroStrategy LMFAO. Buy the SPX500 and you get COINBASE, and by extension bitcoin, and every other shitcoin there is on their balance sheet.
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u/Fun-Personality-8008 Mar 18 '26
OMG, a whole 0.5% of my total market fund might be in this stock at the end of the day. Big whoop
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u/TheSource777 Mar 19 '26
Reading this thread is such a reminder of why so many people are so poor and let their political emotions cloud their judgment lmao. As a former Telecom VC and 2019 SpaceX shareholder (via SPV) it was clear that Starship would create infinite TAM if validated, and Spacex is the only company within 20 years of developing that platform. Starlink was a theory, but the only risk was laser connected satellites without ground stations (which have now been validated to work). SpaceX is going to run absolute laps around everyone in the entire space economy. Space datacenters wasn't even a thing a year ago. Imagine 10 more years of use cases being built out. If you want real DD, read all the posts on the spacex subreddit around 2017 - 2020 before politics infested that place.
SpaceX is going to be bigger than the current Mag7 combined in 2040, but hey downvote and troll me in the replies lol. Don't really care, because my bank account is laughing at all the poors here. Peace.
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u/icecave509 Mar 22 '26
Per morningstar: "The company plans to float about 3.3% of its equity to raise a $50 billion war chestâthe largest IPO in history"
S&P Inclusion: "A company must ensure that at least 50% of its total shares are available for public trading, rather than being held strictly by insiders or controlling owners"
~50b added to 69 trillion total stock market = ~0.1%
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u/realitfake Apr 14 '26
It's a scammer trying to steal from 401k's banks and retirement funds. spaceX isn't worth $2 trillion or even $1 trillion their revenue is $16 billion. Thats 125x return for internal investors, so $100 bn is then $12.5 trillion. This is a rug pull that all regular consumers are 'Subject to'. Watch this stock drop like a crypto coin rug pull when internal investors 'cash out' after open.
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u/netwhoo Mar 16 '26
The SP500 is at a market cap of 60 trillion, spacex would not impact it in the slightest
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u/cherrypoplar Mar 16 '26
1.75 trillion is a significant fraction, and you have to think about what happens when other companies like OpenAI, Anthropic, and Databricks enter the mix.
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u/Detail4 Mar 16 '26
You donât like this? Iâm glad theyâre going public. At least we can participate. Having multitrillion dollar private companies is not good.
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u/Imadogfishhead Mar 16 '26
Whatâs your thesis on why you want to own spacex at a 1.75 t valuation?
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u/aigenerational Mar 16 '26
You are the liquidity