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0 pointsdataminded24d ago0 comments

SpaceX made fast index inclusion a condition of where it listed. Nasdaq changed its index rules so that instead of having to wait months to a year, SpaceX can enter an index after 15 trading days.

Index funds track an index mechanically. If you run an S&P 500 fund, you have to mirror the S&P 500. If a company gets added to the index, every fund tracking the index must buy it to match the index -- there is no discretion. Pension funds hold a lot of index funds.

So the causal chain is that pension funds track indexes, indexes have to buy the companies in the index, SpaceX got a fast path to the indexes. SpaceX will launch and pension funds will buy the stock, presumably propping up the stock price.

It would take a lot for pension funds to undo this and would be the opposite of index investing.

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kevin_nisbet24d ago· 1 in thread

And to try and expand on why an index would include a waiting period in it's rules, my limited understanding is it's to give the public markets time to follow the company and review several quarters of financial results to stabilize the valuation in relation to those results before getting included in the index.

dgellow24d ago

That’s my understanding too, it’s for price discovery

Eisenstein24d ago

By bypassing the rules this way they are making people doubt the security of index funds, which would damage the market just by association. Anyone who cared about the stability of these instruments would categorically deny such a request. It seems to say a lot about the market makers in general that this is being allowed.

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