More Americans invest their retirement funds in passive S&P 500 index funds than in any other investment. The Vanguard and BlackRock S&P 500 ETFs alone manage nearly $2 trillion in assets, and the Vanguard ETF (VOO) recently topped the $1 trillion mark.
But they won’t be controlling SpaceX stock immediately after Friday’s biggest mega-cap IPO in market history.
The index committee, which oversees the rules for new stock inclusion in the S&P 500 index, said no to the largest IPO in history, at least for the first year of public market trading history.
Facing a new era for large-cap stocks, Open AI and Anthropic are expected to follow Friday’s SpaceX IPO with a huge offering that will push them into the realm of the largest U.S. public companies from day one, forcing index managers to decide whether to bring forward the standard 12-month waiting period for new stocks.
Unlike S&P, the index committees for the Nasdaq and Russell market benchmarks said they would update their rules. In the simplest terms, this is what this means for core investors in index funds in the US market.
“If you want SpaceX, you’re not going to buy the S&P 500. You’re going to buy the Nasdaq 100 or the Russell 1000,” Todd Thorne, chief ETF strategist at Strategas Securities, said on ETF Edge this week.
SpaceX is scheduled to begin trading on the Nasdaq market on Friday, but if you own ETFs like VOO, BlackRock’s IVV, or State Street SPDR S&P 500 Trust (SPY), you’ll have to wait until mid-2027 to gain exposure to SpaceX.
The decision to keep SpaceX in place for so long before it becomes a member of the S&P 500 was not supported by Peter Haines, head of index and market structure research at TD Securities. “I personally did not agree with this decision,” he told ETF Edge.
Haynes said on the ETF Edge podcast segment that this is a “controversial discussion” but added: “In my opinion, this is a natural extension of what already exists in global benchmarks.”
He cited the example of Saudi Aramco, which became the largest IPO in history when it went public in 2019. At the time, both FTSE and MSCI were creating fast-track models for global benchmarks that added stocks to the index after five to 10 days. “The US benchmark aimed to follow the lead of global benchmarks,” he said. “They have a sizable inventory of Benchmark ‘Made in USA’ inventory,” Haynes said.
“What this does is [the] “S&P will not be adding OpenAI and Anthropic if those IPOs happen,” Sohn said.
Son said dueling decisions by index providers could lead to “index wars,” specifically disparities in performance among the S&P 500, Nasdaq, and other indexes.
Haynes added that it could be “more than a year, and longer” before S&P 500 investors gain exposure to SpaceX as the index committee also continues to “profitability test” the stock, potentially further exacerbating performance issues between the S&P 500 and other popular U.S. benchmarks.
SpaceX was valued at $1.75 trillion when it began trading, but it remains a risky investment, with a net loss of $4.28 billion in its most recent quarter. OpenAI and Anthropic are burning through cash and racking up losses at a significant rate, while generating significant revenue. They are expected to face intense scrutiny from the S&P 500, similar to what SpaceX just received.
For fund investors, there are other ways to gain exposure to SpaceX as a complement to core portfolio positions like S&P 500 funds. A small number of ETFs, primarily thematic space and technology innovation funds, already own SpaceX through direct pre-IPO shares. But investors have flocked to space ETFs in recent weeks. For example, Tema ETF’s Space Innovators ETF (NASA) was launched on May 30th with total assets of $2.6 billion. It is one of the funds that provided direct access to SpaceX before its IPO.
Risk-minded investors could also take advantage of a new wave of leveraged ETFs that just launched to offer bullish and bearish bets on SpaceX stock’s daily performance by up to 2x. Next Monday, ProShares plans to launch the Ultra SpaceX ETF (SPCF), which aims to double the stock’s daily performance. GraniteShares plans to launch two similar funds: GraniteShares 2x Long SpaceX Daily ETF (SPAL) and GraniteShares 2x Short SpaceX Daily ETF (SNK).
Song cautioned that these leveraged investments involve large boom-and-bust cycles and are typically aimed at day traders rather than long-term investors looking for diversification. Because these investments are intended as trading vehicles rather than core holdings, losses can add up quickly and expense ratios are relatively high.
The biggest takeaway for most investors is that the index they’ve long relied on to capture the big names in the U.S. market is now out of stocks. However, ETF managers are expected to continue to be creative with new ideas, even where investors have not yet responded. “I think there are some small independent companies as well.” [ETF] The issuing company goes to another index provider and creates “S&P+SpaceX … ‘Large Caps + SpaceX’ … ‘+Anthropic.’ … There’s nothing the ETF industry can’t do in terms of creativity,” Song said.
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