Mega-Cap IPOs Make Major Waves for Index Investors
As SpaceX and Anthropic eye public listings, index providers brace for major market dislocations.
When mega-cap companies go public, index providers and investors will see it as dropping battleships into the old fishing pond. The resulting waves are going to soak everyone.
Privately held artificial intelligence (AI) vendor Anthropic announced its filing of a draft registration statement with the U.S. Securities and Exchange Commission (SEC) for an initial public offering at a later date. According to the company’s website, Anthropic has not decided on the number of shares it will offer, nor at what price. The company recently closed a $65 billion fundraising round, valuing the company at $965 billion post-money.
The news comes as the SEC published SpaceX’s revised Form S-1 on the market regulator’s EDGAR database. The conspicuously absent OpenAI reportedly is filling out its underwriters bench for a possible September IPO. The AI company reached a post-money valuation of $852 billion, according to CNBC.
The Index Aspect
If index providers add these firms that would instantly become one of the 10-largest listed companies by market cap before their trading prices stabilize, it could cost them dearly due to resulting massive price dislocations.
“Leaving out a mega-cap company means the index is not doing its job,” James Angel, associate professor and faculty affiliate at Georgetown University’s Psaros Center for Financial Markets and Policy, tells Global Finance. “It thus makes sense to include a big IPO fairly quickly.”
“Big IPO” is not an understatement. Wall Street consensus expects SpaceX’s IPO to result in a market capitalization between $1.75 trillion and $2 trillion, would lower Meta’s and Tesla’s rankings in the10-largest Nasdaq-100 Index components by market capitalization while move Micron Technology out of the Top 10. If rumors of a SpaceX-Teslamerger prove true, only Nvidia, Alphabet, and Apple would have a larger market capitalization than the resulting $3.4 trillion behemoth.
The Fast Path
Nasdaq has already addressed the mega-cap issue by updating the methodology for inclusion in its Nasdaq-100 Index, which represents the 100 largest Nasdaq-listed non-financial companies, in May.
Among the major changes made by Nasdaq was introducing quarterly index reconstitutions in March, June, and September, in addition to its regular December reconstitution. Nasdaq has also incorporated a “Fast Entry” pathway for new listings that rank among the top 40 of the current Nasdaq-100 constituents by full market capitalization, based on both listed and unlisted shares.
“These companies are evaluated on their seventh trading day and, if eligible, added shortly thereafter, with all existing liquidity requirements still applying,” explained Emily Spurling, Global Head of Index at Nasdaq Global Indexes, in an interview posted on the Nasdaq website. “The quarterly rebalance handles the broader population of eligible companies; Fast Entry ensures the index can respond in a timely way when a company of significant scale enters the public market.”
SpaceX stock could see its highest price jump not on June 12, its reported IPO day, but on July 7, the earliest it could be added to the Nasdaq-100 Index, according to The Motley Fool’s Sean Williams.
“Taking into account the Juneteenth (June 19) and Independence Day (July 3) holidays for the stock market, the 15th trading day, including its IPO day, is July 6,” he wrote. “Index funds that attempt to mirror the market-cap-weighted Nasdaq-100 will be required to purchase a jaw-dropping number of shares after this 15-day period comes to a close. Mandatory purchases from exchange-traded funds and index funds are estimated at $22 billion to $27 billion.”
“Nasdaq made the biggest change in the Nasdaq-100 rules as an inducement to listing on Nasdaq,” says Angel. “The other index providers have no similar incentive to shorten the seasoning period. I get the impression they are just doing it to make their indices more reflective of what is going on in the market.”
The Not-So-Fast Path
Meanwhile, S&P Dow Jones Indices (S&P DJI) is mulling methodology changes to its S&P U.S. Indices and Dow Jones U.S. Total Stock Market Indices. The company is considering whether to implement a “narrowly defined rule exception for MegaCap companies and adjustment to the IPO seasoning period,” according to a prepared statement.
The index vendor defines mega-cap companies as those with a market capitalization equal to or greater than the 100th largest company in the S&P Total Market Index, which was approximately $150 billion at the start of June.
According to reports from Bloomberg News, the major consideration is whether to reduce the seasoning period for IPOs before they are eligible for inclusion in an index to six months from 12 months
The consultation period ended on May 28, and any changes that S&P DJI proposes to implement would take effect “prior to the market open on Monday, June 8, 2026, unless otherwise announced,” the statement continued.
The company declined to comment beyond its published statement.
