That would be true IF the stock was already being traded.

All we have at the moment is just Elon saying "I think this is worth $1.5T, convincing a small subset of people to buy shares, and then because of this change, market following funds will be forced to pile in before the market has had time to discover the actual true fair price, thus artificially propping up the price until Elon has had time to unload a load more shares. The rule changes serve only Elon, not regular investors.

Historically, the share price falls sharply after an IPO in the vast majority of cases. In this case, with the asking price masssively over earnings, significantly more than any other company, it should be expected that the price will fall significantly in the weeks after IPO.

Shortening the window before it gets included in the index is a cheap trick to force passive investors to pile in at the inflated prices, in an attempt to artificially boost demand and prop up the share price.

If the company genuinely was worth the valuation being asked for in the IPO, they would have no problems with just waiting a few months before it would be included under the existing rules.

If someone is trying to bend the rules of my passively managed index fund to their will, are they trying to actively manage my passively managed index ETF ?

> Historically a $1T market cap with a PE of 20.0 would be achievable with a $50B/yr profit. That seems easily achievable eventually for SpaceX, as it has actual hardware and services and IP.

It seems crazy to me to make a comparison between a company being valued on it's current profit and then to say it's reasonable for another company to have the same market cap because it could eventually have the same profit.

It's years away from $50B/year profit, if it ever gets there. The IPO valuation is insane.

It does have real hardware, but it’s not in wild growth areas. They’re making their most consistent money from Starlink, which is a solid product but has growth limited by competitors from conventional ISPs with far-superior fiber networks, and the space launch business is similarly not the kind of thing where you get Google/Facebook-level growth curves. That’s not a slight, it’s just different industries: advertising companies can grow rapidly because scaling customers is so much easier than launching cargo into orbit.

The wildcard there is AI, and that seems especially dangerous to project long-term revenue from their current performance: xAI is barely in the market except renting capacity to Anthropic, so you’re gambling that they’ll continue to pay $1¼B/month for what is largely a commodity offering. Even if you’re bullish on Anthropic, that doesn’t mean xAI gets part of their profits, and given the way they blindsided the local authorities there’s a substantially greater than zero chance that they’ll get a major setback if the neighbors win their lawsuits. That doesn’t mean they’re doomed, but anyone estimating their future performance has to factor in some real risks.

Yet, I, a relative peasant financially has been hit by 3 different brokers that I'm eligible to participate in the offering. I would hazard a guess they are not getting the uptake in institutional money they were hoping for.

“ The existing investors don't have liquidity.”

Did mom and pop invest..? No they did not. The investors who did knew the long time horizon they were committing to.

They could’ve gone public earlier - they chose not to and venture capitalists were happy to keep supplying the funding.

Also lol @ using that act to explain why people take longer to ipo. Lest we forget how deep venture capital has become. Hahahha

>I don't understand why we suddenly change the rules and rush things

Because this is how the rulemaking processes for these indices have always worked?

Why are you suddenly making this argument now, and weren't complaining about previous rule changes?

> The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500.

Yes, which is why the news that S&P isn't changing their rules is kind of notable. Vanguard's S&P 500, $VOO, just hit US$ 1 trillion AUM; the next biggest, $IVV, is just over $800B; $SPY is just under $800B.

* https://etfdb.com/compare/market-cap/

* https://www.tradingview.com/markets/etfs/funds-largest/

That's about USD 2.5T.

As they should have. The rules were in flight with a layover time measured in days on assets that are managed on the timescale of years. There was a legitimate reason to act urgently. It's easy to make claims in hindsight but the information on hand it was 100% the right call to protect your investments.

This is not misinformation. Misinformation is saying the proposed rule change and their proximity to trillion dollar IPOs introduced no risk. Please do not spread such misinformation.

VTI uses crsp and is very large

> marketed for decades

So why change? You're not building a case for why this change is needed. Is there even another Nasdaq 100 company like SpaceX? Probably not because it would be an obvious point of discussion. So now we need to add a new 'thing' to our definition of tech, then change our funds to adopt our new definition. To what end, with this haste?

> The NASDAQ 100 has seen practically no net outflows

Is it a fund or just an index? If an index, what are you monitoring when you cite 'no outflows'?

> I opposed the rule changes at S&P

So you are happy with this outcome, but also so upset at the people that evangelized your preferred policy position that you think HN readers should cut them from the information diet?

Seems most likely that the public outcry actually influenced this outcome, so I don't see why the nuances of alarmism about it (imminent decision vs fait accomplit) should nix an entire information source.

It's more about sidestepping the waves of market manipulation.

sure it's not a given, but I certainly am not confident enough that it won't happen to bet my money in it, which I would automatically be doing if it was admitted to the SP500

SpaceX is not worth $1 trillion, when most of that valuation is based on xAI being worth far more then their already dominant position in the space launch business.

That blog post is garbage and fails to accurately convey the paper it is based on.

>I rely on the Center for Research in Securities Prices (CRSP) monthly stock return database, which contains all common stocks listed on the NYSE, Amex, and NASDAQ exchanges. Of all monthly common stock returns contained in the CRSP database from 1926 to 2016, only 47.8% are larger than the one-month Treasury rate in the same month. In fact, less than half of monthly CRSP common stock returns are positive. When focusing on stocks’ full lifetimes (from the beginning of the sample in 1926 or first appearance in CRSP through the 2016 end of the sample or delisting from CRSP), just 42.6% of common stocks, slightly less than three out of seven, have a buy-and-hold return (inclusive of reinvested dividends) that exceeds the return to holding one-month Treasury Bills over the matched horizon. More than half of CRSP common stocks deliver negative lifetime returns. The single most frequent outcome (when returns are rounded to the nearest 5%) observed for individual common stocks over their full lifetimes is a loss of 100%.

>Individual common stocks tend to have rather short lives. The median time that a stock is listed on the CRSP database between 1926 and 2016 is seven and a half years. To assess whether individual stocks generate positive returns over the full ninety years of available CRSP data, I conduct bootstrap simulations. In particular, I assess the likelihood that a strategy that holds one stock selected at random during each month from 1926 to 2016 would have generated an accumulated 90-year return (ignoring any transaction costs) that exceeds various benchmarks. In light of the well-documented small-firm effect (whereby smaller firms earn higher average returns than large, as originally documented by Banz, 1980) it might have been anticipated that individual stocks would tend to outperform the value-weighted market. In fact, repeating the random selection process many times, I find that the single stock strategy underperformed the value-weighted market over the full ninety years in ninety six percent of the simulations. The single-stock strategy underperformed the one-month Treasury bill over the 1926 to 2016 period in seventy three percent of the simulations.

>The fact that the overall stock market generates long term returns sufficiently large to be referred to as a puzzle, while the majority of individual stocks fail to even match Treasury bills, can be attributed to the fact that the distribution of stock returns is positively skewed. Simply put, large positive returns to a few stocks offset the modest or negative returns to more typical stocks.

https://obj.portfolioconstructionforum.edu.au/articles_persp...

Compare this to the blog post:

>The implication is devastating for index fund orthodoxy: When you own a broad market index, you’re mathematically forcing yourself to hold the 96.6% of stocks that create no value while simultaneously diluting your exposure to the 3.4% that generate all returns.

The professor just told you that investing in any individual stock is a terrible decision and that investing in more stocks means having greater exposure to the stocks that do net a return, creating a puzzle, where diversification doesn't reduce yields, in fact it did the opposite: it increases the yields.

There's also a general fallacy that any index (directly referred to as index orthodoxy) has to be a "broad market index", when in reality there are many competing indices. If someone came up with an index that would follow any investment strategy the blog post suggests and it turns out to work reliably, then people would switch part of their portfolio to that index. "Index othrodoxy" would prevail, because people just need a better index rather than abandoning the idea of an index altogether.

It's also difficult to reconcile with the fact that after fees, most active funds have failed to net higher returns to their investors. This random blog post is basically delivering an active investment strategy on a silver platter that will make fund managers and the people investing into it rich, is this believable? Consider that it's written in a "shocking" AI style, trying to sell you something.

Funnily enough, the ad in the middle of the blog post "The U.S. Treasury collapse is HERE!" is incompatible with the premise of the article, that 96% of stocks are worse than treasuries.

>But even if we use the more moderate 80/20 framing, the strategic implication is identical: If 80% of market returns come from 20% of stocks, why would you construct a portfolio that treats all five hundred stocks in the S&P 500 equally?

The thing is, you don't have to do that, like at all. There are indices like the S&P 500 Pure Value and S&P 500 Enhanced Value that are known to outperform the regular S&P 500. The problem is that they have done so over the long term and long term really means long term. There have been decades where they underperform.

Also, the article is three times as long as it needs to be, it's clearly AI generated.

Edit: Invesco renamed their ETF to S&P 500 Concentrated QVM.