It's more insidious than that. These IPOs aren't being rushed, they were waiting for all the pieces to be in place to force 401ks and other retirement plans to buy these IPOs.
The most recent change was the NASDAQ adopting the "fast change rule" which allows newly IPO'd companies to be listed in the index after only 15 days of trading. This rule was decided March 30, 2026 and only came into effect May 1, 2026.
The plan is to rapidly drive these prices up in the first 15 days, get the companies listed in the NASDAQ so funds are forced to purchase them at higher prices, then leave retirement accounts holding the bag.
> The most recent change was the NASDAQ adopting the "fast change rule" which allows newly IPO'd companies to be listed in the index after only 15 days of trading.
Official justification, and other changes besides timeframe, e.g.:
> First, eligibility and company size. As multi‑class share structures have become more common, we now consider both listed and unlisted shares when determining eligibility and ranking. This allows the index to reflect a company's full economic size, while index weighting remains based solely on listed shares. This change affects who qualifies for inclusion, not how constituents are weighted.
* https://www.nasdaq.com/newsroom/nasdaq100-index-methodology-...
> A new method to calculate the market capitalization of companies to determine their eligibility for inclusion in the index. It involves adding listed stock and unlisted shares that are part of different share classes. Scrapping a rule that requires companies to float a minimum 10% of their shares. Companies with a low float will receive a lower weighting on the index. […]
* https://www.reuters.com/business/new-nasdaq-rules-include-fa...
As unlikely it is to happen at scale, as a thought process - what would happen if people start selling those index funds in a mad rush? Just drives the transaction volume because those with that new money will just buy something else in the market?
I know SpaceX, Anthropic, and OpenAI will probably be a drop in the bucket in terms of scale of these funds, (free float % etc). But, is it realistic to take the money out of index funds for a bit until the price of these new stocks come crashing eventually?
If people actually dumped index funds for cash en masse it would be catastrophic. To attach some numbers, MSFT averages about 35M shares in daily volume, and that includes all the market makers, HFTs, etc. BlackRock (iShares) owns 593M shares of MSFT and Vanguard owns another 482M. Together, the amount of shares that index funds own is about a month and a half of total trading volumes. I'd bet that such a crash would unfold over about 2-3 days, which brings up the specter of stocks literally going "no bid", where there are not enough buyers for every seller to sell, at any price.
Likely the government would step in and inject cash directly into the markets to support them in such a scenario, because a broad-index stock market crash is the modern-day bank run. Retirees carry the bulk of their savings in the form of stocks; if it disappears, we'd likely face revolt.
If you hit sell on a vanguard ETF and it sells on the market, then Vanguard isn’t the buyer is it? So in that situation with everyone dumping ETFs there would be a lag on the time taken for the ETF to sell and Vanguard to then dump the stocks back out in the market. It’s never occurred to me the situation where huge numbers of people dump index funds and how Vanguard/Blackrock account for that without becoming bag holders of the underlying stocks themselves.
In any case, I’m not sure that large enough numbers of ETF holders are sitting close enough “to the button” to hit sell in the event of a sharp downturn occurring over the space of even a week or two. And a lot of them would see it as an opportunity to DCA into the dip anyway.
If it's an ETF it's a little complicated. The usual mechanism for selling an ETF is that there's a buyer on the other end who's buying shares in the ETF itself, not the constituent stocks. Arbitrage keeps the price in line with the index constituents; if the ETF diverges from its constituent assets, some HFT can buy the ETF and sell the constituents and that will force them to converge.
However, most ETFs are also setup such that they can create or destroy shares in response to large shifts in demand. In this case, if enough people hit sell, the ETF itself will buy back shares and use the proceeds to sell the underlying assets, in a transaction that mechanically should be market-neutral and just propagate the supply/demand of the fund down to the individual stocks.
With Vanguard specifically, it's even more complicated, because VTI is not a separate ETF. It's a share class of the Vanguard Total Stock Market Index Fund. But the mechanism is largely the same - it has the same Authorized Participant system to mint new shares in case of high demand and redeem shares if everybody sells, and then passes these requests on to the underlying mutual fund, which can then piggyback on some of the tax efficiency benefits of the ETF.
Same old story of too big to fail. The government will "inject cash", that is borrowed, so that retirees 401k accounts don't go down. But who pays back the borrowed funds? The non-retirees. Everything is optimized for the boomer generation to be fine, who cares about anyone else?
If you're retired and that exposed to stocks then you deserve to lose the money you risked.
Pretty sure most people just sit in the default requirement 20XX year funds, which heavily weight away from equities once people are retirement age.
Market makers aren't included in those numbers, Vanguard, etc don't trade normally but on secondary markets most of the time.
These stocks crashing (not saying it will or won’t happen), means AI is crashing, and that will be a much broader selloff than these 3. Add Microsoft, Micron, Amazon, Oracle, Nvidia, Supermicro, Dell, etc, any company that has direct or indirect exposure to the massive AI boom (and possibly their lenders).
Just look at Corning’s lifetime chart
While unlikely to happen at scale, by way of anecdata I'll say that I and my extended family have almost all shifted money away from funds that are heavily coupled to the fate of GenAI.
The bottom is going to fall out of the market and it's going to take years to recover, I don't see any reason to suffer through that (and neither do my retirement-age relatives).
I'm after steady gains in an approximately efficient market, not a wildly unsustainable speculative boondoggle, thanks.
So you’re still hedging or you 100% fled AI? I presume you have gone to a broader portfolio. But if tech crashes doesn’t everything? And isn’t tech holding up the entire market so they won’t let it happen? And how can you even avoid GenAI if people are cramming it into everything and it’s constantly shocking sectors of the market?
If the bottom is falling out of the market in AI I think it's likely other things will fall too though.
What’s your portfolio? I don’t particularly have a wealth of investment options in my employer-provided 401k (ADP Workforce Now)
Not OP but I’m in a broad-based Euro index so I gain on the stocks and on the fact that the dollar is going to shit. I haven’t seen the enormous AI-juiced gains that have become commonplace but I’m also insulated from commodity hardware companies trading like rocket ship startups and whatever ends up coming out of that insanity.
Somebody is going to have to explain the business case for Micron trading like it’s Google. We all know that fabs are a low-margin capital intensive business, right?
example of a steady gain in an approximately efficient market if Big Tech crashes?
Very few 401ks offer the NASDAQ 100 as an investment option. Last I checked it was <1%.
Apparently the rule change also affects CRSP, which is the index behind Vanguard's Total Stock Market (VTI) index funds.
https://finance.yahoo.com/markets/stocks/articles/spacex-ipo...
VTI in turn is the primary holding of most of Vanguard's Target Date retirement funds, which are widely held in 401ks.
NASDAQ index has a 3x float weighting (and a far, far smaller total capitalization) which makes it far more susceptible.
Other indexes do not have these multipliers, and are much larger. The exposure for e.g. VTI is far, far less.
Recent changes:
> CRSP indexes were also recently changed to better accommodate fast entry. New IPOs are eligible for CRSP's suite of indexes after five trading days, provided they pass the index's eligibility and investability screens. Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion. The weighting of stocks in CRSP indexes is also based on free float, which should help address the investability challenges associated with thinly traded stocks.
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
Total market indexes and target date funds will include this and SpaceX on float adjusted basis I believe. The blast radius is much larger than funds that track the NASDAQ directly.
But isn't that what "total market" means? I don't see how if you invest in a total market fund you could declare "except for SpaceX, Anthropic and OpenAI". Why is it so bad for these accounts to be invested in these companies anyway? Seems pretty typical, i bet all kinds of companies are added to total market indexes each year.
Until recently companies that IPOed weren’t immediately added to the major indexes so there was a longer period for price discovery. This year that changed; so you have retirement funds that typically are more conservative acting as exit liquidity for these massive IPOs.
I would have less of an issue if the inclusion in major indexes was delayed 6-12months but we are looking at inclusion within like 5 days for some of these indexes.
The float will get bigger as you wait tho, since it's common for early investors to be locked for e.g. 6 months. You can argue it's better to smooth the entry as float gets unlocked rather than being front run by all the hedge funds in a single day on a massive capitalization.
The lockup periods are also being fiddled with: https://finance.yahoo.com/markets/stocks/articles/spacex-ipo...
No but your funds are backed by ones that are
almost all 401k plans offer funds based on s&p 500, not nasdaq/russell others. s&p has also halved their trading days requirement from 1 yr to 6 months, but that's still sufficient to be past the post-ipo lock-up period.
I don't think the S&P has actually made a decision yet. It is in progress, though: "The S&P Index Consultation on MegaCap IPOs" is the search term
What is being considered by S&P:
> Stocks would become eligible for the index after six months rather than 12 months. The requirement to have a minimum Investable Weight Factor of 0.10 (roughly at least 10% of shares publicly floated) would be dropped. Companies would not be required to demonstrate profitability.
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
Though:
> Still, S&P Dow Jones reminds market participants that the proposed changes would apply only to index eligibility. The actual inclusion of new constituents remains entirely at the discretion of the index committee.
sp500 has profitability requirement, I doubt LLM companies will show profits any time soon.
It is not going to take 15 days for short selling hedge funds to right-price these IPOs. It is going to take something closer to a few seconds.
Hedge funds won't try to short the stock; the holders are almost all institutional investors and insiders who are long on the stock and have no reason to lend them to HFs betting on a price decline.
What they might do is trade bespoke instruments like a credit default swap on datacenter construction deals. Stays underneath the radar of politicians and tech insiders who are invested in a particular outcome.
Until the inevitable crash in price when the lockup of employee shares end and they dump their shares onto the market. These fresh companies shouldn’t be included into passive investing securities until 180 days at least. It’s just making the public bag holders.
>The plan is to rapidly drive these prices up in the first 15 days, get the companies listed in the NASDAQ so funds are forced to purchase them at higher prices, then leave retirement accounts holding the bag.
Dumb question: why couldn't retirement accounts simply not purchase these?
These funds don’t invest actively (picking individual stocks). Instead they invest in indexes that track larger portions of the market. So they’ll automatically buy once the company is listed on the NASDAQ.
Why do I imagine that no one whose retirement account is about to get smoked is in place to make decisions about whether or not this is a good investment
The point of that kind of account is that most people aren't in a place to make decisions about what is or isn't a good investment.
Seems like there should be a market for a no-Elon/OpenAI/Anthropic ETF out there.
Or one that just imposes a reasonable waiting period on adding newly-IPO’d listings.
I get the sentiment that this is unscrupulous, however, isn't 15 days enough time to find the right price? Or will that not really happen until first quarterly earnings report, which will not occur within that 15 day window?
The fact that you know there’s a large pool of price insensitive buyers only 15 days away has to have some price impact.
No, IPO pops, and honey moon periods are common.
And there are plenty of ways to manipulate the price, such as issuing a low float to a hyper hyped stock..
4-8 quarters for most tech IPOs to settle. IPOs are manufactured for the good times around young co's, so not surprising, and economic stability isn't a question of days/weeks/months.
And yes often a falling knife
This is pretty predictably wall street & federal regulators scamming normal people, retirement funds, etc, taking their fees and exit window at everyone else's expense
> 4-8 quarters for most tech IPOs to settle
Where are you getting this timeline from?
Mostly by having a pulse for the last 10-20 years as someone in the bay area seeing it repeatedly play out as tech IPOs get dumped onto retail investors repeatedly, including the 'good' ones. Being lucky enough to participate in IPOs makes you check these wrt when to balance IPO pop exit (weeks/months) vs long-term tax benefits of holding (2yr+).
- The initial pop is known to be manufactured by banks, so mostly benefits insiders, so good time to diversify. I'm conservative so sold to cover effective basis or whatever risk strategy :)
- The lockup period (6mo) is a similarly known artificial event, and studies show that
- Tech companies take ~8 quarters of prep for the IPO as they do financial engineering to transition from VC growth-at-all-costs to public $, and I'd expect the same for whatever nonsense they pulled to juice numbers to shake out. And that's not including oddballs like the Musk alternate universe, just normal tech companies covering up EBITDA and low interest rate madness.
- Tech is especially volatile as an industry, so even more skepticism here. Eg, the latest IPO I was involved in was a successful professional social network play, and chatgpt killed it.
Most/all of these are googleable things
Almost every retail investor has a random vibe like this about a market-timing hypothesis. They’re pretty much all cocktail conversation at best.
Lock-up expiry is a real effect. Everything else you mention is Reddit stuff—trading the pop is practically a gamble.
? Very much agreed, the IPO pop is a manufactured pricing event focused on investor dynamics rather than direct fair market pricing, making it more of a gamble than normal. Including gambles in index funds defeats the point.
Maybe the confusing point was my involvement is (discounted) pre-IPO shares, which almost by definition, is not an activity accessible to retail investors.
I mean the goal is that you have multiple earnings report to show sustainability.
Meanwhile some of these companies are also lobbying to be able to only have to submit annual or biannual earnings reports, too.
Everyone is looking for multiple ways to leave the dumb money holding the bag.
How do these people sleep at night coming up with schemes like that?
On a big pile of money surrounded by beautiful women.
They don't. They work all night to invent them.
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This has been a thing in the CRSP indexes (ie. the benchmark for Vanguard’s VTI) forever. As long as it meets float and cap requirements, it’s inserted into the indexes five days after trading begins.
It makes sense. They intend to track the market as it is.
Though, you can definitely make the case that the popularization of index funds has allowed their holders to essentially become patsies to hype IPOs.
> As long as it meets float and cap requirements
Even with the CRSP indexes this was recently changed to make fast-tracking for these IPOs easier.[0]
> CRSP indexes were also recently changed to better accommodate fast entry . . . Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion.
That change is notable because both Anthropic and SpaceX are planning to IPO at well under that old 10% requirement.[1] Neither would have qualified for fast-track inclusion before, but both are virtually guaranteed to clear the absolute valuation bar.
[0]https://www.schwab.com/learn/story/some-indexes-accelerate-e...
[1]https://www.economist.com/finance-and-economics/2026/06/01/c...
The person I was responding to was speaking to the fast-track concept, which has been a thing in CRSP indexes for a quite a while.
The float requirement changes are directly due to these huge IPOs only placing small amounts of float on the market. Their goal seems to be tracking the market and making this change prevents them from excluding two notable companies from their indexes.
IIRC CRSP indexes are float-weighted so they aren't going to attempt buying a ton of these IPOs anyway due to that low float.
Again. Would I have made the change? No because placing that little float on the market isn't kosher IMO.
Strongly recommend reading this linked paper, written by CRSP folks:
https://indexes.morningstar.com/insights/analysis/bltcd8e699...
These IPOs will have minuscule impact on the indexes initially. They will have a big impact if they can maintain share price in the first ranking/reconstitution after the lockup period expires.
They will have a big impact if they can maintain share price AND the float increases due to the lockout period expiring (ie. pre-IPO owners selling off shares).
I'd like to know how the CRSP/Morningstar folks feel about the interesting lock-up period rules that Elon has inserted into the SpaceX IPO and how that jives with their analysis.
Won't the lockup expiry increase the float on these already-included companies, forcing mechanical buying by all the very large pool pool of folks holding these index funds? Thus creating forced buyers to maintain said share price?
Every single index fund is different. They all have publicly available methodology guides; you can read them to understand how it works and to model various scenarios.
This particular one, the CRSP total market - which Vanguard uses for VTI - has a “modern” methodology that is thought to be very good. Once every three months they re-rank the entire market and assign weights based on the market as of a particular point in time. Then, a randomly-chosen number of days later, the fund (Vanguard) begins a weeklong reconstitution process in which they buy and sell stocks to reflect the new weights. It is intentionally a weeklong process so that the market is setting prices and not Vanguard with the size of their orders.
The lockup expiry happens, the market reacts, the market is re-weighted, the index reconstitutes. In that order. The price of the stock has to survive the increased float to force the index fund to buy lots more shares.
> This has been a thing in the CRSP indexes (ie. the benchmark for Vanguard’s VTI) forever.
CRSP has recently changed their rules:
> CRSP indexes were also recently changed to better accommodate fast entry. New IPOs are eligible for CRSP's suite of indexes after five trading days, provided they pass the index's eligibility and investability screens. Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion. The weighting of stocks in CRSP indexes is also based on free float, which should help address the investability challenges associated with thinly traded stocks.
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
Very true. Anthropic just raised money at the end of last week.
There's no way they could have done that without telling those investors the S-1 was prepared and awaiting their signature on the round before they hit Submit, so to speak.
Nonsense.
The extremely small float of these offerings will make index weights a rounding error.
Ask your LLM of choice to compare the likely value of shares to be held by index funds with the market cap of each of these companies.
I don’t understand the argument that small amounts don’t matter.
Diversification doesn’t work if you throw in low quality investments you wouldn’t consider on their own. It just lowers returns.
except that they changed the index rules to OVERweight them because of their small float.
They only go into the index if they are actually worth enough to go into the index. If they drop below a certain value they will naturally be kicked out of the index just like any other company. I.e. if they are not actually in the top 500 US companies then they will not be in the 500 index. The risk of any one company is balanced by all the other companies in the index also.
If they really are a scam, their value will drop and they will be kicked out of the index. I still don’t understand how this means people will be “holding the bag”.
Additionally if you really believe that they are a scam and their price will fall you can just short the stock to completely neutralize their effect on your 401k.
By the time they drop and being kicked out (if they do) the insiders already dumped their shares. Not to mention now all the index fund holders will rush to sell creating even more price pressure.
Shorting (itself being a bad idea for regular investors) also breaks the mantra of passive investing, 401k or otherwise. It’s almost impossible to short right after IPO because of low float and high margin risk.
These mega IPOs are just using passive investors as backstop.
If you believe this is going to happen you can change the allocations of your retirement plans.
You can protect yourself, but many won't be aware of the situation until it's too late, and institutionally managed funds won't be able to change their rules in time to avoid holding these as part of the index funds they hold.
I actually cannot adjust the index funds offered.
Does your plan support BrokerageLink?
Many individuals can, but good luck reaching out and convincing the entire country that they should look into making changes to their retirement fund allocations without sounding like a kook.
There's maybe, at best, 1% of the country even aware that this might be a problem.
What should we be looking for?
In your 401k portal/website there's usually a setting like "I plan to retire on year X". When you set that, or something similar, there's typically a managed fund that gradually decreases risk as you approach that year. When you have lots of time before retirement you can ride the ups and downs but as you get closer the less time you have to recover from a downturn so the more conservative you want your investments.
If you're really worried and want to be conservative tell the portal you want to retire in 2030. That will allocate your investments to something conservative and you'll be more protected from a downturn. On the other hand, you'll also be equally protected from an upswing.
/not a financial advisor
I’m not sure I could. Even starting to research how to prevent being affected by these changes shows that there’s layers upon layers of systems that are being manipulated, and there are costs charged for moving the capital in my retirement account to other accounts.
Saying you as in any random person can protect themself from a group of dedicated experts who also have access to levers the common person can’t pull, is kind of not believable on its face.