SpaceX and other mega IPOs to be included in indices ahead of schedule? Nasdaq and Russell "give the green light," while S&P "holds the line" and doesn't follow!

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S&P Dow Jones Indices refuses to open a "fast-track" channel for ultra-large IPOs, diverging from the practices of Nasdaq and FTSE Russell.

According to Bloomberg, S&P Dow Jones Indices announced the results of a consultation on June 4, stating that it will maintain current rules and reject shortening the 12-month “seasoning period” required for newly listed companies. It will also not exempt companies from profitability or public float requirements based on company size.

This means that SpaceX, which is preparing for an IPO and is valued at about $1.75 trillion, will not be eligible for the S&P 500 Index for at least a year after listing, and must still meet profit and float requirements.

Previously, Nasdaq had taken the lead in modifying its rules, allowing large IPOs to join the Nasdaq 100 Index just 15 trading days after listing, while FTSE Russell shortened the waiting period to 5 trading days. S&P’s “contrarian” move surprised the market. Bloomberg Intelligence ETF analyst James Seyffart said: "I am indeed surprised but S&P is the market leader; it has the ability to go against the tide."

Rule dispute: Three thresholds, one game

The core of the controversy lies in the three admission requirements that the S&P 500 Index has adhered to for decades.

The first is the "seasoning" rule: newly listed companies must have at least 12 months of public trading before being considered for inclusion; second is the profitability requirement: the sum of GAAP earnings for the last four quarters must be positive, and the most recent quarter must be profitable; third is a minimum public float, requiring at least 10% of shares to be actually available for public trading.

On April 30 this year, S&P Dow Jones Indices launched a public consultation on "handling ultra-large-cap companies," simultaneously submitting the above three requirements for discussion. According to the consultation document, "ultra-large-cap" is defined as a total market cap no less than the 100th constituent company in the S&P Total Market Index, which is about $112 billion. The proposal suggested shortening the seasoning period to six months and fully exempting ultra-large-cap companies from profitability and float requirements. The consultation ended on May 28. If approved, the new rules were scheduled to take effect before the market opened on June 8—the same time SpaceX planned to list on Nasdaq on June 12.

This S&P decision further highlights the divergence in approach between S&P, Nasdaq, and FTSE Russell.

Supporters of rapid inclusion argue that indices should quickly include these massive companies to truly reflect the structure of what investors actually hold—after all, these trillion-dollar enterprises are economically significant long before they meet traditional index requirements.

S&P’s stance represents another logic: The stability of rules is a value in itself; easily “green-lighting” individual companies will undermine the index’s credibility as an objective market benchmark.

SpaceX’s “Triple Challenge”

SpaceX’s planned listing happens to brush up against every one of these three rules.

According to Fortune, SpaceX posted billions in losses last year, failing the profitability requirement. The company expects to float only about 5% of shares, well below the 10% minimum. In addition, under normal seasoning rules, SpaceX cannot join the S&P 500 for at least a year after listing.

Meanwhile, OpenAI and Anthropic are also preparing for IPOs, both in loss-making status. The post-IPO valuation of all three companies could put them among America’s largest by market cap, but they do not meet S&P’s current requirements for profitability or float.

Veteran corporate governance expert Nell Minow told Fortune that SpaceX’s entry into the Nasdaq index itself was already a “rule-bending” outcome. "This goes against the very purpose of an index. The significance of an index is to tell investors: we screen for you, only including companies that meet certain conditions. Now, they’re quietly relaxing the standards."

Passive funds’ concerns: Trillion-dollar chain reaction

This rules debate ultimately points to tens of trillions of dollars in ordinary investors’ retirement accounts.

According to S&P Dow Jones Indices, as of December 2024, assets benchmarked to the S&P 500 total about $20 trillion, with around $13 trillion passively managed. Passive funds have no choice—whatever stocks are included in the index must be bought, regardless of price.

Opponents of rapid inclusion argue that requirements for profitability, float, and trading history exist to prevent benchmark indices from chasing market fads. Rapid IPO inclusion could expose passive funds to greater volatility and force them to buy aggressively before fair market pricing is established.

This worry is not unfounded. In March, Nasdaq introduced “fast-track” rules allowing large IPOs to join the Nasdaq 100 just 15 trading days after listing, taking effect May 1. According to Bloomberg, Goldman Sachs analysts estimate the rule change could trigger up to $60 billion in passive fund forced buying within Nasdaq 100. The asset scale tracked by S&P 500 far exceeds the Nasdaq 100, making its potential impact even greater.

Minow predicts that large institutional investors ultimately won’t sit idly by. "If I were head of CalPERS or New York State retirement fund, I’d call Vanguard and Fidelity directly to create a custom index excluding these companies."

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