The SpaceX IPO: How Index Funds Are Adapting

Index providers are bending their rules. Do they have a choice?

Nasdaq tweaked its rules to allow Elon Musk’s newly public SpaceX SPCX into its flagship Nasdaq-100 Index after 15 days of trading. FTSE Russell added a fast-entry rule to its suite of US indexes to allow large IPOs into its portfolios after just five days. Morningstar CRSP and S&P Dow Jones both eased float percentage requirements for some stocks, but S&P notably retained its earnings screen and 12-month waiting period.

There’s no separating the timing of the changes with the June 12 IPO and the company’s very low float—or shares freely traded. Its 4% float at IPO would have made the space and artificial intelligence company ineligible for most major index funds under old rules. Now, though, some major indexes have opened their gates to SpaceX and other mega-IPOs. It’s a good reminder, too, that not all indexes are the same.

The Role of Indexes

On one hand, broad indexes—like those offered from any of the companies previously noted—should accurately represent a broad swath of the stock market. On the other hand, asset managers like Vanguard, iShares, and Invesco—who replicate those indexes through various index funds—have a fiduciary duty to act in the best interest of their investors. Those motivations can sometimes be at odds.

Often, they aren’t, though. A good index represents its target market, and its constituents are easily traded. This ensures that funds tracking the index can follow it closely, giving index fund investors the exposures they signed up for.

What makes a good index?

Good indexes also tend to be broadly diversified and may exclude struggling companies.

for index funds reflect this, with broad index funds earning higher Process Pillar ratings than narrower benchmarks, or those without adequate risk-control measures.

This is highly simplified, but it raises the question of whether an index with SpaceX is a good index, given its unique ownership structure, negative net income, and massive valuation.

Active Decisions

There’s a reasonable argument to be made that indexes shouldn’t own companies that aren’t incentivized to listen to their shareholders. Why own a stock if its management won’t necessarily act in the best interest of shareholders?

Market participants agreed with this idea in 2017, resulting in FTSE Russell’s introduction of a minimum 5% voting rights rule for its broad market index constituents. S&P also adopted a similar policy that year, requiring that new index constituents not offer share classes with different voting rights. The reasoning was that “voting rights in public hands were important to shareholder governance.” Few notable companies ever ran afoul of these requirements, so they were mostly an afterthought. Until now.

The extremely founder-friendly ownership structures of SpaceX, OpenAI, and Anthropic could make these firms ineligible for broad Russell indexes per the voting rights requirement. But FTSE Russell amended the 2017 rule this year to allow sizable IPOs into their indexes even if they don’t meet that 5% threshold. If an index’s job is to represent the market, an index should own all stocks in the market, even if SpaceX’s public shareholders are afforded just 0.8% of company voting power initially.

S&P scrapped its multiple share class eligibility exclusion in 2023.

The Broad Influence of Index Changes

Index-tracking funds wield even more power than their trillion-dollar portfolios would suggest. Not only do index funds have substantial de facto voting power with their ownership of nearly every stock in the world, but rebalancing these behemoths can result in substantial share price moves for many portfolio companies. At each scheduled rebalance, index funds are either forced buyers or sellers of thousands of stocks. There will be plenty of forced buyers when SpaceX enters these portfolios.

How an index handles each mega-IPO determines how many shares index funds will buy and when those trades will occur.

Below is a summary of five major equity index providers and their policies regarding entry for large IPOs in their respective suites of broad, market-cap-weighted US stock market indexes.

S&P

The S&P tweaked the float criteria for its suite of broad US indexes on June 4 but notably abstained from loosening its long-standing profitability requirement—a rule that requires new additions to have positive earnings in the most recent quarter and the most recent four quarters combined. This prevents SpaceX, OpenAI, Anthropic, or other IPOs from being added to the S&P 500 roster for at least one year.

Another Musk company, Tesla TSLA, failed this screen for over a decade before being added to the bogy in 2020.

Once any of these firms satisfy this “financial viability” requirement, they don’t necessarily have to float at least 10% of shares. They’d be added once the stock’s float-adjusted market capitalization is greater than or equal to 10% of the 100th largest company in the S&P Total Market Index, ranked by total market capitalization.

Regardless of when SpaceX is added, trillions of dollars of index fund assets tied to the S&P 500 will rebalance. Further, the myriad active managers who maintain some mandate to that index may also have to adjust their portfolios to reflect the change in benchmark composition.

CRSP

The Center for Research in Securities Prices, acquired by Morningstar in early 2026, was one of the only index providers that had previously admitted IPOs ahead of any scheduled rebalance, and it remains the case this year. CRSP allows new IPOs into its suite of market indexes after five trading days if they pass the index’s eligibility and investability screens.

The eligibility screen was tweaked earlier this year to allow low-float companies into its benchmarks. Fast-track IPOs now must have at least 10% float or have a float-adjusted market that’s at least 0.005% of the “index-eligible universe”—roughly $3.3 billion as of March 2026. CRSP only applied the 10% float test for fast-track IPOs previously.

Since over $3 trillion in Vanguard index funds track CRSP US market indexes, eligibility and investability screens are crucial. Quickly adding new IPOs to an index allows that index to better reflect its target market, but the point is moot if funds aren’t able to efficiently buy or sell the newly public stock.

Russell

Russell’s new fast-entry rule allows large IPOs into its suite of market indexes after five trading days—the same as CRSP. It only applies to sizable IPOs with float-adjusted market caps that rank in the top 500. This cutoff would be roughly $17.5 billion as of May 31.

Previously, its US equity indexes, including the Russell 1000, granted IPOs entry at each scheduled quarterly rebalance but only if the stock also met certain other eligibility requirements, like a 5% minimum float and 5% minimum public voting share. The recent update does not require a minimum float or voting percentage for fast-track IPOs.

MSCI

MSCI has not changed its rules. MSCI’s US market indexes admit IPOs after 10 trading days as long as they’re at least 80% larger than MSCI’s minimum size requirement. This policy has been in place since 2007. On May 31, 2026, the minimum size requirement was about $13 billion, making fast-track IPOs eligible with float-adjusted market caps above roughly $23.4 billion.

Fast-track IPOs do not need to meet free-float requirements or a liquidity screen.

Nasdaq

Nasdaq’s new rule clearly targets only the largest IPOs and even favors such offerings in its newly modified weighting scheme.

For fast entry, a newly public company must rank within the top 40 holdings of the Nasdaq-100 Index by total market cap. This meant a total market cap of roughly $149.4 billion on May 31. SpaceX easily qualifies.

Nasdaq waits 15 trading days before adding any IPO to its flagship index to avoid possible early volatility in those stocks’ prices. This makes it easier and cheaper for index funds to implement any adjustment. After 15 days, it scales a large IPO’s float-adjusted weight up by 3 times until its float ratio reaches 33.3%. This multiplier is down from the 5 times weighting adjustment considered in the original proposal, but it’s still somewhat arbitrary and gives more prominence than might be deserved to a low-float company. This slightly distorts the total picture since the rest of the portfolio is weighted by float-adjusted market cap.

With hundreds of billions pegged to the Nasdaq-100 Index, scaling up the weight of a low-float company triples the amount of SpaceX stock that Invesco QQQ Trust QQQ and other Nasdaq-linked index funds will have to buy. In isolation, these purchases should amount to only a few percentage points of the company’s available shares, but across dozens of other index funds, it adds up.

Float Will Determine SpaceX’s Market Impact

A total market capitalization of $2.11 trillion at the end of its first trading day makes SpaceX the seventh largest public company in the world. However, it will not immediately be one of the largest holdings in broad index funds. Its puny initial float limits its immediate size in many index funds. The company’s float-adjusted market cap of nearly $90 billion places it outside the top 100 and is expected to collect less than 0.20% of Vanguard Total Stock Market ETF VTI once added.

Substantial insider ownership prevented Saudi Aramco’s 2019 IPO from making a dent in most index funds. SpaceX, Anthropic, and OpenAI may follow a similar path. At least at first.

The June 3 prospectus shows that Musk owns around 49% of SpaceX equity, with other insiders also owning a considerable amount. The $75 billion raised at IPO represents about 4.25% of total equity and slightly dilutes other shareholders.

SpaceX prohibits insiders from selling stock for at least 180 days, with early releases possible at specific milestones before then. Musk and other significant investors, however, are restricted from selling the stock for 366 days. Since much of the company is owned by insiders, expiring lockup periods could unleash a whole lot more equity, or float, into the market. Sales from insiders will increase SpaceX’s float-adjusted market cap and therefore its position in market-cap-weighted indexes.

The table below shows several float ratios that could materialize after both the 180- and 366-day lockup periods. It’s unlikely for SpaceX’s float ratio to exceed 30% after 180 days and 50% after 366.

In one year, SpaceX could be among the 20 largest public stocks in the United States based on float-adjusted market cap. And if the stock appreciates from its $160.95 June 12 closing price, it could be even larger.

Assuming no more share issuance, 60% float is the realistic ceiling for SpaceX with its dual share class system. Musk owns approximately 98% of company B-shares and 11% of its A-shares. Musk is unlikely to sell any B-shares because that share class holds 10 times the voting rights of the company’s A-shares. This dual structure is what grants Musk near-total control of the company. His B-share ownership counts for roughly 42% of total SpaceX shares.

Regardless of where float ratios settle, SpaceX is unlikely to be a major component of index funds in the near future. The chart below shows just how large a part SpaceX may become, with projected weights based on possible float-adjusted market caps after each significant lockup period ends.

SpaceX may collect more than 1% of a broad, cap-weighted index after its first year. But it may collect more or less in other indexes, depending on their particular approach. An optimistic float estimate could place SpaceX’s weight in the more concentrated Nasdaq-100 Index around 1.8%, assuming a flat market and the maximum 60% float ratio. However, because of Nasdaq’s new weight multiplier for low-float securities, it would earn a higher weighting, approximately 2.6%, with a 30% float ratio.

The trillions tracking these indexes mean that index funds are going to have to buy a lot of SpaceX stock. Outside of S&P Dow Jones, a 2% stake on average across flagship indexes from the other four index providers would represent an ownership level of approximately $72 billion, or 6.7% of the stock’s 60% maximum float in June 2027. The true number is likely to be lower since SpaceX insiders are unlikely to sell all of their shares on the open market once lockup periods expire.

A 30% float ratio after one year of trading and a 1% average stake across notable index funds represents an ownership level of around $36 billion, also 6.7% of the stock’s 30% float. Inclusion in the S&P 500 would increase these figures.

The Impact on Index Funds Is Overblown

It’s true that SpaceX is the largest IPO the world has ever seen. It’s not true that this large IPO will upend indexes and funds that track them. Some index providers bent the knee to this IPO because of its enormous size and prominence, but its short-term impact on most index funds will be minimal.

The company’s influence is likely to increase as its float grows over time, but SpaceX will not supplant market giants Nvidia NVDA, Apple AAPL, or Microsoft MSFT at the top of market indexes anytime soon. SpaceX’s limited float will not allow it, and Musk’s considerable control makes its float ratio unlikely to eclipse 60% in the foreseeable future.

The company’s total market cap would have to be at least 40% larger than any of the market’s biggest firms for it to hold a candle to those giants. At closing on June 12, SpaceX’s total market cap was less than half of the market’s three largest firms.

More mega-IPOs are coming soon. The immediate public market impact of SpaceX, Anthropic, OpenAI, Stripe, and Databricks is likely to be minimal, but the potential growth of this crop of large IPOs may reshape index funds in a few years’ time. The degree of their individual and collective impact, however, rests squarely on how many shares are freely traded and when those shares become available.