Special treatment for the SpaceX IPO?

SpaceX is shaping up to be one of the largest IPOs in financial history. In response, the major index providers, including Nasdaq, S&P Dow Jones, and FTSE Russell, are all reportedly considering changing their existing rules to allow SpaceX and other giant IPOs to be added to the indices faster and with less stringent liquidity rules.[1]

Let’s discuss Nasdaq’s proposed “Fast Entry for New Nasdaq Listed Large Companies.”[2] It would result in large IPOs being added to the Nasdaq-100 index only 15 trading days after the IPO and would waive existing liquidity requirements.

Nasdaq circulated the proposal because it was “seeking feedback from investors, clients, and other industry professionals on proposed enhancements and updates to the index methodology.” Here’s my feedback: the proposal stinks. Here’s some additional feedback from others:

• “Arbitrary, unfair and potentially risky,” Jason Zweig, The Wall Street Journal, March 13, 2026.
• “The SpaceX IPO Scandal … low-float strategies and "fast-track" index inclusion rules are being used to turn passive 401(k) investors into exit liquidity for insiders.” Patrick Boyle on Finance, March 15, 2026.
• “The biggest bagholder exercise of all time — the Operation Overlord of jamming retail investors with an overpriced IPO,” Robin Wigglesworth, The Financial Times, March 16, 2026.

Let’s discuss the two most objectionable aspects of Nasdaq’s proposal: liquidity requirements and timing.

First, liquidity requirements. The Nasdaq-100 currently requires that stocks have a float that is at least 10% of shares outstanding. The proposal waives this rule entirely for stocks with high market cap. Bad idea. If float is too low, the market cap is meaningless and should not be relied upon for any purpose.

Consider VinFast.[3] In August 2023, it listed on Nasdaq via SPAC with a tiny float of 1% of its shares outstanding. In the subsequent days of chaotic trading, VinFast went up around 700% and was briefly worth almost $200B.[4] Its valuation was widely perceived as inexplicably high; on trading day 13, I called VinFast “bafflingly overpriced and bafflingly volatile.”[5] Anyone foolish enough to buy on day 15 would have greatly suffered as the price of $17.21 has now fallen to around $3. Should VinFast have been added to any indices on day 15? I don’t think so. Yet under Nasdaq’s proposal, VinFast’s meaningless market cap in August 2023 would be above the threshold for fast-track inclusion in the Nasdaq-100.

Second, timing. Currently, a stock cannot be added to the Nasdaq-100 index until more than three calendar months after going public; the proposal would reduce that period to 15 days for large-cap stocks. Bad idea. That’s too short for price discovery to occur. For one thing, short selling is mechanically difficult or impossible in the initial days after the IPO. For another, underwriters typically engage in “price stabilization” in the first 30 days. In the words of Ritter and Welch (2002), price stabilization is “the only instance in which the SEC permits active attempts at stock price manipulation.” When a stock is added to an index, it should be added at an honest price that does not involve manipulation.

The S&P 500, in contrast, currently requires a “seasoning” period of at least 12 calendar months. That allows ample time for price discovery in an orderly fashion. It allows the market to work through the supply of shares when the IPO lockups expire (generally occurring after 180 days). It also facilitates liquidity provision on the inclusion date. We know that on the inclusion date, a large amount of mechanical buying will occur, and someone needs to be selling on that date. According to Murray and Sammon (2026), a long seasoning period allows arbitrageurs to “gradually accumulate shares ahead of index fund demand, spreading the price impact over a longer horizon.”

We already have a major index with a very short seasoning period. The CRSP total stock market index, used by Vanguard funds, has a seasoning period of five days in some cases. According to Murray and Sammon (2026), this practice produces bad outcomes for index investors. Prices rise prior to inclusion and then fall subsequently; index investors are forced to buy at high prices on day five. They find that in the months following inclusion, prices fall by as much as 10% due to the short seasoning period.

Who benefits from high prices on day five? One beneficiary is the issuer. Since everyone expects the price will be elevated on day five, the issuer can sell more shares at a higher price on the IPO day. Murray and Sammon (2026) find that issuers raise 6% more capital when the seasoning period is only five days.

Perhaps it’s true that giant IPOs deserve special rules from index providers. If so, the rules should be stricter, not looser. Isn’t price discovery more difficult and time-consuming for a stock with a giant market cap? Isn’t the cost of a chaotic index inclusion process larger for larger-cap stocks? I’d suggest that for IPOs with giant market cap, the seasoning period should be longer and the liquidity requirements should be more stringent. That’s the best way to prevent index investors from being stuck holding the bag.

Endnotes

[1] “Giant IPOs From SpaceX to OpenAI Put Index Rules Under Pressure,” Bloomberg, March 18, 2026.

[2] “Nasdaq-100 Index Consultation,” Nasdaq, February 2026.

[3] References to this and other companies should not be interpreted as recommendations to buy or sell specific securities. Acadian and/or the author of this post may hold positions in one or more securities associated with these companies.

[4] “How a Small EV Maker Became More Valuable Than Ford and GM Combined,” Bloomberg, August 29, 2023.

[5] “VinFast's share price 'baffling' for skeptics of Vietnam EV maker,” Nikkei Asia, September 1, 2023.

References

Murray, Chris, and Marco Sammon. "Primary Capital Market Transactions and Index Funds." The Review of Asset Pricing Studies (2026).

Ritter, Jay R., and Ivo Welch. "A review of IPO activity, pricing, and allocations." The Journal of Finance 57, no. 4 (2002): 1795-1828.