MSCI keeps standard rules for SpaceX's $75B IPO

SpaceX's path to index inclusion will follow standard MSCI methodology, diverging from rival index providers that fast-tracked the record $75 billion listing.

MSCI Inc. said it will process SpaceX's initial public offering under its standard methodology, declining to follow Nasdaq and FTSE Russell in fast-tracking the $75 billion deal into benchmark indexes.

"MSCI will apply its standard methodology for the treatment of new issues in the MSCI Equity Indexes," the index provider said in a statement Monday, without elaborating on the timeline for inclusion.

The decision contrasts with Nasdaq Inc., which cut its Nasdaq-100 waiting period to 15 trading days from three months, and FTSE Russell, which shortened its timeline to five trading days. S&P Dow Jones Indices also held firm last week, maintaining its requirement that companies show positive net income over the past year — a hurdle SpaceX is not expected to clear until 2027, according to Evercore ISI research analysts.

The divergence among index providers creates an unusual dynamic for the largest IPO in history. SpaceX, which begins trading June 12 on the Nasdaq under the ticker SPCX at $135 a share, could see forced buying from passive funds tracking Nasdaq and FTSE Russell indexes within weeks, while S&P 500 and MSCI trackers may wait years. Bloomberg Intelligence estimated that fast inclusion in the S&P 500 alone would have triggered about $14 billion in forced passive buying.

Index Gatekeepers Take Divergent Paths

The split among index providers reflects a broader debate about how quickly newly public companies should enter benchmarks that collectively oversee trillions of dollars in assets. Proponents of fast-tracking argue that excluding a company of SpaceX's size — its $1.77 trillion implied valuation would make it larger than all but six S&P 500 members — distorts index performance. Critics say profitability and trading history requirements exist to protect investors from volatile, thinly traded stocks.

"The purpose of the S&P 500 is to emulate the US domestic market," Howard Silverblatt, former senior index analyst at S&P Dow Jones, said in an interview. Maintaining the net income requirement is "the hardest one for the S&P to defend," he said, adding that he believes a GAAP requirement is beneficial to the index.

SpaceX's financial profile makes the profitability question particularly acute. The company's capital expenditures are projected to soar to more than $360 billion by 2030, up from more than $20 billion last year, according to research teams at Goldman Sachs Group Inc. and Evercore ISI. Goldman's analysts penciled in positive free cash flow for 2031 of more than $72 billion after hitting a trough of negative $105 billion in 2029.

What Standard Treatment Means for Investors

For investors in passive funds tracking MSCI indexes — widely used by institutional investors globally — the standard methodology means SpaceX shares will not appear in those benchmarks until the next quarterly review cycle at the earliest. MSCI typically adds new issues to its indexes during quarterly rebalancings, with eligibility determined by factors including market capitalization, liquidity, and trading history.

The stakes extend beyond SpaceX. Anthropic PBC and OpenAI are also weighing IPOs as soon as this year, Bloomberg News has reported, with potential valuations exceeding $1 trillion each. Both companies face similar profitability challenges: Anthropic's operating profit for the June quarter is expected to hit $559 million, but the company does not necessarily expect to be profitable in future quarters as it ramps up spending on computing resources. OpenAI is not expected to be profitable in the coming years.

"From a corporate strategy standpoint, it's not irrational to choose to run at a loss," Lawrence Creatura, a fund manager at PRSPCTV Capital LLC, said in an interview. He pointed to Amazon.com Inc. and Uber Technologies Inc., which didn't join the S&P 500 until years after going public. "It will mean you won't be in the S&P 500 for the moment. But look at those companies now."

SpaceX has set aside up to 30% of its share offering for retail investors, the Financial Times reported, compared with the typical 5% to 10% range for companies going public. The move suggests Elon Musk is counting on his base of individual investors to absorb shares that institutional funds tracking the S&P 500 and MSCI indexes cannot yet buy.

This article is for informational purposes only and does not constitute investment advice.