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JumpCrisscross | on: Can the stockmarket swallow Anthropic, SpaceX and OpenAI?
> Do you think it’s more or less likely that they will make the same change as the other benchmarks?

S&P has historically been more conservative. My personal guess is they won't adopt all of the proposals.

lovich | parent
But you think they’ll adopt some of these proposals that are in the benefit of these companies IPOing at the expense of large funds?
throwaway2037 | root | parent | next

    > at the expense of large funds
I don't understand what you wrote. It sounds like you are saying this is a zero-sum game of winners and losers -- SpaceX "wins" and the tracking funds "lose". The ETFs and mutual funds that track these indices don't care what stocks are added or removed. They have one job: To track the index as closely as possible with the lowest cost.
Retric | root | parent | next
SpaceX’s IPO is believed to be set at wildly inflated prices. The company just isn’t that profitable, it lacks significant opportunities for growth, worse its facing significant competition in the near future. Trying to short it when index funds are forced to buy vast quantities of stock is a losing proposition, but those indexes are definitely getting hosed over the next decade.

At least that’s the general consensus, nobody would be worried about index funds buying stock if it looked like a good long term investment. Really the expectation that the stock price would tank is why there’s been a push to change the rules.

noname120 | root | parent | next
Not true, they collectively lose investors if they become less attractive. Probably not an overnight thing, but if people are told that index funds are not attractive anymore then increasingly fewer people will put their money in them vs a hand-picked portfolio.
lurkingllama | root | parent | next
But also to follow the existing rules set in place to protect passive investors, no?
bluecalm | root | parent | next
SpaceX will not "win". Its current investors will win by selling at IPO and in following months at inflated prices to unwilling buyers.
deaton | root | parent
And historically indices had a waiting period for IPOs to allow for true market price discovery, and the fast tracking as well as allowing small float stocks into the index generates a ton of upward pressure on something that we already don't know the true value of.
sersi | root | parent | next
If the S&P adopt those rules would there be any index fund that is S&P without the new rules?
mdnahas | root | parent | next
Vanguard doesn’t use S&P, because they wanted low fees and the license was expensive. They use CRSP’s index rules.

I checked and it looks like new stocks get added to the CRSP index at the next rebalancing, which is September. So, even the knockoff S&P adds it quickly.

BTW, CRSP was run by University of Chicago, but got sold recently to Morningstar, a mutual fund company.

thephyber | root | parent | next
An index fund like the S&P500 is not the S&P500. It is stuck competing in a world of low margin pain.

I sincerely hope S&P and Nasdaq rollback the SpaceX-targeted changes, but unfortunately I seriously doubt it.

camel_Snake | root | parent | next
Dimensional funds have a type of index factor funds that roughly track these indices without strict adherence to S&Ps inclusion rules. That's the only one I'm aware of.
dnnddidiej | root | parent
IZZ, or in other words fuck em.
JumpCrisscross | root | parent
> they’ll adopt some of these proposals that are in the benefit of these companies IPOing at the expense of large funds?

Yes. And I see the argument for it. It’s hard to claim you represent the market if trillions of dollars are outside it for no reason other than newness or capital-structure weirdness. (I agree with excluding unprofitable companies.)

thephyber | root | parent | next
Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear.
JumpCrisscross | root | parent
> Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear

These indices have lots of competition. NASDAQ 100 lost basically zero money when they made these changes. If S&P makes them, I'm doubtful anyone will react either.

When S&P was still taking public comment, I put the link on HN. It got like two upvotes. This isn't something materially care about as much as like to get angry about on the internet.

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lovich | root | parent | next
Then why are these changes being made for these companies IPOs?
lenerdenator | root | parent | next
There's quite a bit of money in, say, the cannabis business; do they have any representation in indices of note?
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lovich | root | parent
What was the point of your comment saying

> S&P has not finalized a rule change yet.

If you were responding to someone saying the benchmark indexes were changing their own rules?

Like the actual intent of the comment and not just observing reality like someone saying the sky is blue.