Ah, so you'd like the passive broad market index which contains the 500 biggest good companies?

Do tell us if you find one I guess.

what's the argument for it being a scam?

why go that far? herbalife moto is probably "we're a pyramid scheme scam" and they are 45% vs sp500 25% for last 12mo.

you'd better of investing scam500 than sp500 nowadays.

To a first approximation, yes, the index funds all need to buy the stock on the same day.

An unexpected surge of buying like this should lead to a big price hike. But everyone knows it's happening, so you'd expect every hedge fund and proprietary firm in the world to buy the day before the index funds buy, and sell into the price hike. So in fact the price hike will be a day earlier than expected. But wait, anyone smart enough to see that should buy the previous day...

In this way the "smoothing" of the trading at entry and exit gets passed on to intermediaries: other market participants who are expert at this.

This all costs the index funds, because every dollar of profit for the other firms is a dollar out of the pocket of the end investor. And huge index events like this are a particular bonanza for these traders. But it probably costs less than you think. Ultimately it's a highly competitive market: the slippage from this approaches the extent to which the prop traders have a higher cost of capital, plus a small risk premium. And remember that they don't have to find "extra" money to fund this trade. When they buy SpaceX they will sell 499 other stocks, doing the same trade there in reverse. Here's a study that approximates the effect at 0.86%[0]. By comparison, the banks underwriting the IPO typically take around 6% [1]. Though this will be smaller for a huge IPO like SpaceX, while the index arb trade will be bigger.

[0] https://www.eastspring.com/hk/insights/deep-dives/navigating...

[1] https://www.pwc.com/us/en/services/consulting/deals/library/...

S&P500 is not a total market index. It tracks a specific kind of large firm, with certain filters.

Fast tracking means that the market likely wont have enough time to find the settled price (especially with the knowledge that passive funds are about to buy), and including a mispriced thing does not necessarily make the benchmark more accurate.

> If a significant percentage of the market is excluded from the index because they don't meet index inclusion criteria, then then index stops being a useful benchmark.

So what's the reason for fast entry specifically? If it's a significant portion of the market and will remain so, it doesn't need an accelerated entry. A benchmark should be conservative about new entrants so that it doesn't turn from a market benchmark to a trend/fad benchmark.

If time validates the valuations the entry will come in time, just like for previous entries.

It may be used as a benchmark, but that’s not actually the purpose of it. The purpose is to serve as a way for people to invest in a representative sample of the market. It can still be a representative sample with safeguards. If you want a benchmark without safeguards, you can calculate one without risking millions of people’s life savings.

It’s a benchmark of the market under certain rules, like having multiple quarters of earnings for the market to value them at.

These companies want special exceptions. If you are an exception why should you be included in a benchmark? At best they should have an asterisk against their name like Sammy Sosa or Mark McGuire if they are not following the same rules.

The S&P 500 may not be a fund itself, but Standard & Poor's is a business whose ability to sell services is correlated with the continued relevance of the S&P 500. It absolutely does balance interests - namely, its own - beyond simply being an academic vehicle for communication of a stable thesis.

It seems entirely reasonable to say: "if we make a certain decision, we correlate both our reputation and a nontrivial portion of the U.S. economy with the whims of one of the most volatile personalities in industry, and we should likely pay attention to this trial balloon that shows such anticipatory fear of the decision that we might lose our reputation as an index altogether."

> They’re meant to communicate some metric about the market.

Is that why people spend time, money and effort creating and maintaining them? They're just broadcasters? That seems dubious.

an etf that tracks the S&P 500 is what then?

This is a big win for many S&P 500 etf holders

The market cap of the S&P 500 according to Google is ~$65T. Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia. That's a big deal.

The rules around index inclusion exist for a reason. Too much control in one person's hands (which SpaceX has), too small a float (so you don't get price discovery), lack of a history of financial performance and minimal trading days just don't give investors confidence and, like it or not, investment decisions are made based on the index. If you want to argue against passive investment, well, good luck with that.

I think a lot of people have this weird idea that what we need is some theoretically unfettered market for "true" price discovery when it's actually regulations like this that create markets. It's like a libertarian brain worm.

I don't think anybody wants these mega-companies out of the index, specifically. They just don't see why rules that exist for a reason should be suspended when the net effect of that is that investors have less information and there is a lot of forced purchasing. If you have confidence in your IPO, let the market decide what it's worth without trying to fix the price because what they seem to want is for insider lock-ups to end about the time we'd otherwise be getting normal price discovery. Kinda weird.

Investor confidence needfs to be managed by creating a stable, regulated market.

Because it hasn't happened yet, and now, won't.

So by that metric the very loud people succeeded: these new IPOs will enter the index under the established rules and time-frames.

Indices are supposed to reflect a part of the market. That's why you have all of S&P500, the Dow, NYSE Composite, and Nasdaq Composite (and several others) in the US — They each reflect different attributes of the market as a whole.

As it stands, it's clear that the users of S&P500 are not interested in the performance of the parts of the market made up of overpriced (and potentially highly volatile) IPOs.

Why do index inclusion rules exist in the first place….?

Go do a google search

Not OP but I will weigh in. The numbers for SpaceX were not looking great, they are burning cash faster than Starship crashing into the Indian ocean. The idea was that with a fast indexing, this would be mostly irrelevant as retirement funds would automatically buy into the IPO after 15 days thus bolstering the company before any sanity would prevail on the markets.

Now that they have to wait a year for that point, that cash burn is going to work against them fairly heavily. There is also something like $20 billion of debt they have to pay back in the next 12 months that might not be covered over so easily now.

That said, SpaceX and a lot of Elons companies have had figures that look terrible for ages, and yet they keep manage to pull rabbits out of the hat. So who knows. Maybe they sell a bunch of assets, they have more than enough to cover the gap.

Not to whom you're replying...

Depends what you mean by successful. If you mean "the IPO goes ahead" then I don't think this makes a difference (unless Elon cracks the shits at this decision and pulls out, which I'm not sure is an option).

If "successful" equates to number-go-up, then my understanding is that Fast Index Entry would have resulted in, effectively, forced purchase of shares by various funds.

When Fast Index Entry (FIE) was a chance of being introduced, the odds of number go up were higher. Now that FIE has been ruled out, there's a lower chance of number go up because there's no "forced blind purchase" group.

were you trying to reply to someone else?

I wasn't familiar with the Center for Research in Security Prices (CRSP). Apparently they were acquired by Morningstar in February 2026. I also found this press release from Vanguard announcing they will be updating fund names (including VTI) to reflect the acquisition https://corporate.vanguard.com/content/corporatesite/us/en/c... but nothing on the fund composition or rule changes.

CRSP has had fast track rules for quite a while.

They changed their minimum float rule for these mega IPOs with low float.

Russell tries to represent what investors are actually buying and selling, a larger swath of the economy than S&P Dow and Nasdaq do

so they get a little bit of a pass for me, but Nasdaq doesn't

Everyone was certain they would. Multiple people I know were rebalancing their portfolios way from the big index funds

> people invest in your business, the business uses their money to achieve more

that was what normally would happen. However, in the last few decades of IPO, it's become common to have two classes of shares - one being the controlling shares that founders hold on to (with 10x the voting rights), and a 2nd class of ordinary (common!) shares with 1x vote per share.

This means the founders (and early investors perhaps) don't give up any controlling stake of a company at all when the IPO while only selling common shares. Doing this means they get to control the company's operations and financial moves, without shareholder oversight, but obtain all of the shareholder investment cash.

You could argue this can lead to better management, as the founders are more likely to care about the company than professional managers that typically would be hired to manage a public company. I say that is only an argument of luck of the draw, rather than a good argument against the above share and voting right splitting.

Look at facebook/meta - would that company be as invested in things like the metaverse, etc, if zuckerberg weren't in a controlling position?

Orbital datacenters is just an excuse of a reason to merge the two companies when there’s nothing else tying them together. They won’t actually happen.

Or at least they are selling the idea of orbital data centers since the technology for orbital data centers does not exist yet or in the short term.

> the doom pitches as a necessary political backlash

It was totally misinformed, came well after the public-comment period had ended and had zero net effect other than maybe generating some commissions and management fees for rando managers.

There is bona fide hatred for these companies and their managers. Influencers twisted the facts to channel that for views.

> What's the urgency to bend the rules?

If you’re buying into a tech-marketed fund like the NASDAQ 100 and it doesn’t include a large chunk of the tech market, you’re no longer passively investing in tech. You’re investing in an actively-managed fund.

Historically, companies like SpaceX would have gone public earlier and grown into the index. Recognizing that has changed with multiple $1+ trillion IPO contenders makes sense; as it turns out, I think both NASDAQ and S&P decided correctly.

> What was the common misconception?

That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic).

The top comment and most of its subthreads are run-of-the-mill alarmism.

I don't think doom and gloom on HN had any effect, no.

> S&P wasn't fait accompli, but the NASDAQ 100 was

Sure. Nobody was properly making this distinction in social media, including on HN. Particularly with respect to the differences in scale and purpose between the NASDAQ 100 and S&P 500.

They might but changing the rules for a highly controversial company would do more harm in lost trusts than gain for investors.

lol what

You can just wait for the price to drop post ipo as it usually does if you actually want to invest.

> given that misinfo this was probably the right decision by S&P

The misinformation was almost certainly not taken into account, and it shouldn’t have been.

> everyone would be saying I told you so and screaming

Influencers will scream regardless. It’s what they’re paid to do. The NASDAQ 100 made these changes and is doing just fine.

> will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs

There are lots of indices. S&P largely targets those built around mature companies. If you want a total-market index, those exist and tend to rapidly incorporate IPOs.