SpaceX IPO float limits index disruption
The anticipated SpaceX IPO will generate historic exit value but will not immediately dominate index funds due to float-adjustment rules.
The argument
The hosts discussed reports that SpaceX's potential $1.8 trillion valuation would exceed the combined exit value of all VC-backed IPOs over the last decade. However, they noted that index inclusion rules mean it would initially rank much lower (around 197th) in the S&P 500 due to float adjustments.
The thesis, stress-tested
✓ What validates it
- ✓Official S&P Dow Jones Indices announcement regarding SpaceX inclusion terms
- ✓Initial public float disclosures in SEC filing documents
▸ Risks discussed
- ▸Changes in index inclusion methodology
- ▸Low initial public float limiting liquidity
Hear it yourself
"He did a, an interview with PBS Frontline. It was a documentary in 1997, and this hit me so hard, like, so so hard when I when I first listened to him say this. So he was talking about the difference in yields between stocks and bonds and the historical relationship. And I'm I'm I think you guys have probably heard me say this like you too, and maybe the audience has heard me reference this. So here's here's here's me quoting Peter Bernstein. He said, you got twice as much income owning stocks as bonds. And even though people felt it was very risky, he's talking about stocks, they felt well the difference in income made it worthwhile."
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