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Comment by insane_dreamer | Hacker News Reader

S&P wasn't fait accompli, but the NASDAQ 100 was

> S&P wasn't fait accompli, but the NASDAQ 100 was

Sure. Nobody was properly making this distinction in social media, including on HN. Particularly with respect to the differences in scale and purpose between the NASDAQ 100 and S&P 500.

The fact that a fast track was even considered is controversial IMHO. People flipping out, especially if their retirement is tied up with those indices, is to be expected. No one wants to be a bag holder for billionaire insiders.

You're making a similar mistake treating it as fait accompli that SpaceX will tank between IPO and some future date, but that isn't a given either.

SpaceX is not worth $1 trillion, when most of that valuation is based on xAI being worth far more then their already dominant position in the space launch business.

It's more about sidestepping the waves of market manipulation.

sure it's not a given, but I certainly am not confident enough that it won't happen to bet my money in it, which I would automatically be doing if it was admitted to the SP500

It would make up less than 0.15% of the index with the limited float available at IPO. Even if it went to zero, your portfolio wouldn't notice it.

Firstly, I think 0.15% might be significantly lowballing. Other commenters I've read trying to low ball it suggested 0.5%, which matches up with my calculations - this IPO is allegedly $1.5T on the total amount, and 25% is up for sale, making $375B. The S&P 500 market cap is $69T, which puts the IPO at 0.54%.

In addition, that's just the initial IPO free float value, and other shareholders will be free to shed their shares after IPO (and presumably, that's where the bulk of index investment funds will actually buy from), so the free float will be higher, pushing up that share even higher.

Sure, in terms of overall market fluctuations, 0.5% is significantly less than a typical day of market volatility, but on the other hand in terms of my current portfolio, as a dollar amount that's significantly more than my monthly expenditure when I'm not vacationing. I don't particularly want to be funding Elon's exit strategy when I already believe it to be a scam. Thanks to S&P's decision, about 25% of my investments are safe, but approximately 60% of my funds are linked to FTSE World indicies, which is changing the rules.

As I stated in another post, this is just a cheap stunt to force passive investors to prop up the price before it has a chance to settle. The majority of IPOs settle on a price below the IPO price in the months afterwards, and never before have we seen an IPO with such a high P/E ratio. This is literally unprecedented, and the sensible thing to do would be to stick to the old rules to allow the market time to discover the true value before inclusion in the indices. At the moment, the valuation is just a number in Elon's head rather than a fair market valuation. Forcing index-following funds to purchase it at the artificially high price is reckless at best and profiteering at worst.

In addition, it's not just 0.5%. It's 0.5% now, and then the same for Anthropic, and then the same for OpenAI, then all the other IPOs in the future. To put that into perspective, most investors would baulk at 0.38% TER for a passive fund and move to 0.12% TER. 0.5% isn't nothing.

Every rule change is controversial. This one was less so than almost any prior one I can remember–the dual-class one in 2017 (later reversed) generated far more real press. This one was mostly an influencer thing.

I would't be surprised if the freak-out reaction to SpaceX being on the nasdaq100 and even being considered for the s&p500 was a strong factor in S&P saying no; if so than the histrionics were worth it.

> would't be surprised if the freak-out reaction to SpaceX being on the nasdaq100 and even being considered for the s&p500 was a strong factor in S&P saying no

I would. I know some of the people. And NASDAQ 100-tracking funds have seen inflows, not outflows, as a result of the flip.

S&P management wanted the flip. The econometricians said no, because they're that sort of folk. The influencers get to entertain and drive some fraction of listeners to churn, which I guess keeps the ecosystem fed through commissions and management fees.

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