S&P500 at record highs - time to stay in or pull out?
Discussion
So SpaceX lists on Nasdaq this Thursday under SPCX. Already shaping up to be the biggest IPO in history by some distance - targeting $75bn raised at a $1.75 trillion valuation. Saudi Aramco’s 2019 record of $29.4bn looks quaint by comparison.
The interesting wrinkle is the index situation. Nasdaq changed its own rules so SpaceX can join the Nasdaq 100 in as little as 15 trading days after listing. FTSE Russell followed with a 5-day window. Both clearly rolling out the red carpet.
S&P, though, told them to do one. They refused to water down their criteria, which means SpaceX can’t touch the S&P 500 for at least a year - and only then if they’re actually profitable, which analysts reckon might not happen until 2027 at the earliest. On top of that, SpaceX is only floating under 5% of shares, and S&P requires 10% minimum free float. So it could be quite some time.
The passive fund implications are significant. Getting into the S&P 500 would have triggered roughly $14bn in forced buying from tracker funds. That demand has now been deferred indefinitely, which takes some of the froth out of the IPO pricing thesis for anyone who was banking on near-term inclusion.
S&P’s line was that keeping the rules “preserves core index principles.” Which is actually fair. You shouldn’t be burning cash and floating 5% of shares and walk straight into the world’s most tracked benchmark.
Musk will be in the Nasdaq 100 within a fortnight. Just not where he really wants to be.
The interesting wrinkle is the index situation. Nasdaq changed its own rules so SpaceX can join the Nasdaq 100 in as little as 15 trading days after listing. FTSE Russell followed with a 5-day window. Both clearly rolling out the red carpet.
S&P, though, told them to do one. They refused to water down their criteria, which means SpaceX can’t touch the S&P 500 for at least a year - and only then if they’re actually profitable, which analysts reckon might not happen until 2027 at the earliest. On top of that, SpaceX is only floating under 5% of shares, and S&P requires 10% minimum free float. So it could be quite some time.
The passive fund implications are significant. Getting into the S&P 500 would have triggered roughly $14bn in forced buying from tracker funds. That demand has now been deferred indefinitely, which takes some of the froth out of the IPO pricing thesis for anyone who was banking on near-term inclusion.
S&P’s line was that keeping the rules “preserves core index principles.” Which is actually fair. You shouldn’t be burning cash and floating 5% of shares and walk straight into the world’s most tracked benchmark.
Musk will be in the Nasdaq 100 within a fortnight. Just not where he really wants to be.
Tarby said:
The passive fund implications are significant. Getting into the S&P 500 would have triggered roughly $14bn in forced buying from tracker funds. That demand has now been deferred indefinitely, which takes some of the froth out of the IPO pricing thesis for anyone who was banking on near-term inclusion.
VOO, IVV and SPY alone are $2.9trn in AUM. $14bn, if taken by those 3 funds alone, is trivial.pingu393 said:
loafer123 said:
More to the point, with SPCX, you are a tiny passenger in rocket driven by a lunatic.
It could be great, but
I wouldn't bet any more than I would on the Grand National.It could be great, but
It could come in at 100/1 or I could lose my shirt.
DukeDickson said:
I guess the real bet is at what point you bought Tesla shares. The IPO leading to a single combined entity, while giving some money back to early investors seems to be the most likely plan. Of course in a singular control structure.
I don't see it as Tesla in 2010, but more like buying Tesla today.Everyone knows about it. There's no risk of SpaceX being less than $20 for 10 years then hitting $400 in year 11.
To anyone buying Space X shares.
The people who will make money are the ones SELLING you you the shares.
And any money that goes to Space X is not for shiny rockets and satellites its for servicing debt to service the colossal losses.
The rockets also blow up a lot so that's not far off burning your money.
There might be some fever on buying day but the sales will be lower one week later than they were when they IPO so wait a week if you really want some wait and buy them at a 'discount'
The people who will make money are the ones SELLING you you the shares.
And any money that goes to Space X is not for shiny rockets and satellites its for servicing debt to service the colossal losses.
The rockets also blow up a lot so that's not far off burning your money.
There might be some fever on buying day but the sales will be lower one week later than they were when they IPO so wait a week if you really want some wait and buy them at a 'discount'
Puzzles said:
I m not really sure what people are expecting as it can t go to the moon from a near 2tn valuation
People are buying the hype. The vast majority will see it as the ponzi purchase that it is but Bob Toc it probably right, there will be sufficient ones left who are willing to support that scheme because they feel they will be buying into Musk’s riches, rather than propping them up.
Can't remember who said it but "A bubble doesn't burst because the story is wrong. A bubble bursts because everybody is already in, and when everybody is already in, the only way is out".
Basically there comes a point where nobody is left to pay the current (high) stock price, and those that already own the stock have to sell be it they need the cash, they move onto the next 'thing', or they have borrowed to buy. Tread with caution with Space-X because it will trade like a meme stock.
Basically there comes a point where nobody is left to pay the current (high) stock price, and those that already own the stock have to sell be it they need the cash, they move onto the next 'thing', or they have borrowed to buy. Tread with caution with Space-X because it will trade like a meme stock.
Edited by Phooey on Thursday 11th June 08:49
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