SpaceX IPO will miss a fast path into the S&P 500
S&P Dow Jones Indices kept its rules intact, but other index providers have opened the door to megacap IPOs such as SpaceX and Anthropic.
By Sofia Marchetti · World Affairs Correspondent
3 min read
S&P Dow Jones Indices has decided against changing its S&P 500 rules to speed the admission of SpaceX, Anthropic and other large companies expected to go public, the index provider said. The decision matters for retirement savers because the S&P 500 is a common benchmark for funds held in 401(k)s and other long-term investment accounts.
The index operator had reviewed whether to relax requirements tied to ownership, profitability and trading history, according to S&P Dow Jones Indices. Those standards are meant to limit the index to companies with a record of earnings and shares that are widely available to investors.
By keeping the existing framework, S&P Dow Jones Indices leaves companies such as SpaceX and Anthropic outside the S&P 500 for a year or more before they can qualify, Fortune reported. That gives investors who use S&P-based funds a temporary way to avoid automatic exposure to those names after their public listings.
Other index providers have shifted
The S&P decision does not settle the issue across the broader index fund market. The Financial Times reported that Russell, Morningstar and Nasdaq have changed their rules to allow megacap IPOs into their indexes.
That means investors who do not want exposure to SpaceX, Anthropic or similar listings would need to look beyond whether they own an index fund and check which index that fund follows, Fortune reported. Funds tied to non-S&P benchmarks could add those companies sooner under the rule changes described by the Financial Times.
Fortune reported that excitement around the potential listings has been matched by concern among some investors about the prices the companies may seek. The publication said some investors are wary that expected valuations could be far above the companies’ current businesses, and noted that SpaceX is not profitable.
Retail investors are a bigger target
SpaceX also plans to reserve as much as 30% of its share offering for retail investors, the Financial Times reported. Fortune said companies going public usually allocate about 5% to 10% of shares to retail buyers.
The larger retail allocation would put more of the offering within reach of individual investors rather than leaving most shares for institutions, according to the Financial Times report cited by Fortune. Fortune’s Jim Edwards wrote that the move suggests Elon Musk is seeking support from his large fan base despite questions about the company’s financials.
The combined effect is a mixed outcome for retirement savers. S&P-based funds will not immediately pull SpaceX or Anthropic into portfolios under the current rules, according to S&P Dow Jones Indices. But investors using mutual funds or exchange-traded funds tied to Russell, Morningstar or Nasdaq benchmarks may need to review holdings and index rules if they want to avoid those companies, Fortune reported.
For now, the main dividing line is index methodology. S&P Dow Jones Indices has kept its gatekeeping standards in place, while other major benchmark providers have moved to accommodate a new class of very large private companies preparing to enter public markets.
This story draws on original reporting from Fortune.