Key Takeaways:
Index providers are rewriting the rules for mega-IPOs, forcing passive funds to buy billions in SpaceX and Anthropic stock within days of listing — a shift that critics say inflates prices and erodes the core promise of index investing.
Nasdaq and other index providers will fast-track SpaceX into major benchmarks as soon as five trading days after its roughly $80 billion IPO, compelling index funds to buy massive quantities of stock at potentially inflated prices. The rocket maker is targeting a valuation of about $1.75 trillion in its offering next week, selling under 5% of its shares, according to people familiar with the matter.
"We could have a huge shift in demand for no reason other than the stock has been included in the index," said David Booth, chairman of Dimensional Fund Advisors and a pioneer in index fund development.
SpaceX would rank roughly 130th if included in the S&P 500, with an initial weight of about 0.14%, according to Strategas Securities. Anthropic has also filed for an IPO that could value the AI company at nearly $1 trillion, and OpenAI is not far behind. Under new Nasdaq provisions, SpaceX's weight in the Nasdaq 100 will be inflated, effectively compelling some index funds to triple their buying of the stock. Several index providers will add giant IPOs to benchmarks after as few as five trading days instead of waiting for a seasoning period of up to one year — though smaller companies may not be eligible for the same treatment.
"A broad-based index fund is supposed to be the designated driver at the investment party, and just as the party is getting wild, that's exactly when the designated driver says, 'Here's the ginger ale,'" said Steven Schoenfeld, CEO of MarketVector Indexes. "But now what some index providers are saying is, 'I think you need a Cuba libre with a double shot of rum.'"
The Cost of Fast-Tracking
A 2025 study by Harvard finance researchers Marco Sammon and Chris Murray examined the CRSP stock indexes, which underpin several giant index funds. Since 2017, CRSP has fast-tracked more IPOs, adding them after the fifth day of trading. The study found that these IPOs outperform by 15% in their first five trading days as hedge funds and other opportunists drive up the price, knowing that index funds will have to buy from them on day six. Fast tracking causes index-fund investors to overpay for hot stocks.
If "loading up on mega IPOs at too high a price becomes a new model for index funds," this extra trading cost "could become almost the equivalent of an annual fee charged to investors," said Hanno Lustig, a finance professor at Stanford. He does not believe the cost would be enormous, but it would make index funds less of a bargain.
Regulatory Scrutiny Ahead?
"These developments are worthy of the scrutiny of policymakers and regulators," said Sandip Bhagat, chief investment officer at Whittier Trust, who formerly helped oversee Vanguard's stock funds. "Somebody should be looking at these practices and making sure they're in the best interest of the investing public at large."
Even after the IPO, nearly 85% of SpaceX would remain in private hands — most of it controlled by Elon Musk through a dual-class voting structure. The offering is expected to raise $60 billion to $80 billion, with Goldman Sachs, Morgan Stanley, BofA Securities, Citigroup and J.P. Morgan among the underwriters. SpaceX is scheduled to debut on the Nasdaq on June 12, with the roadshow beginning June 4.
Morningstar, in a contrarian assessment published this week, valued SpaceX at just $780 billion — less than half the IPO target — citing uncertainty around the company's AI business and governance concerns over Musk's expected 85% voting control. Analyst Nicolas Owens said long-term investors "will have opportunities to buy the stock at more attractive levels after the IPO."
For index fund investors, the risk is more structural. If mega-IPO fast-tracking becomes standard practice, the low-cost promise of passive investing — already under pressure from concentration risk in the largest stocks — faces a new drag from forced buying at inflated first-day prices. The SEC has not signaled any review of the practice, but the sheer scale of the SpaceX, Anthropic and OpenAI offerings may force the question.
This article is for informational purposes only and does not constitute investment advice.
