SpaceX is set to officially join the Nasdaq 100 index, giving investors new exposure to the stock while triggering billions of dollars in automatic purchases by index funds. The company’s inclusion in the Nasdaq 100 marks a new chapter in the stock’s closely watched post-IPO journey.
What This Means for Investors
There are over 200 investment products with $800 billion in assets that track the Nasdaq 100. Funds that track the index have to buy SpaceX in order to continue mirroring its performance. That means investors who hold Nasdaq 100-related funds will automatically gain exposure to SpaceX.
Recent changes to index methodologies to accommodate mega-sized initial public offerings have enabled SpaceX shares to be fast-tracked into different stock market indexes. SpaceX has already joined benchmark indexes offered by FTSE Russell and MSCI, two other major index providers.
The Nasdaq 100 is a tech-heavy index and often includes companies with high growth prospects. The Nasdaq in May announced updated eligibility requirements for a stock to be included in the Nasdaq 100. The changes allow stocks to be eligible to join the index 15 days after an IPO, compared to a previous wait period of at least three months.
Implications for the Market
While SpaceX’s market value of more than $2 trillion makes it the sixth-largest publicly traded stock in the United States, it enters the Nasdaq 100 with a significantly smaller weighting and influence. Nasdaq’s index methodology weights stocks based on the amount of shares available for trading. SpaceX went public with less than 5% of its shares available for trading, meaning its weight in the index will start out much smaller than its true market value.
As SpaceX becomes a feature of more indexes, some investors might want to limit – or outright avoid – exposure to the stock. For some investors, CEO Elon Musk has become a polarizing figure. Other investors might be skeptical of SpaceX’s valuation. Analysts at Morningstar value the company at half of its IPO debut, with one forecast suggesting intense volatility.
Original reporting: KTVZ (Central Oregon) — read the source article.
