Following its historic IPO, SpaceX was rapidly added to major global benchmarks after index providers adopted fast-track rules for mega-cap listings. It joined the Russell 1000, FTSE Global Equity Index Series, MSCI ACWI, MSCI USA, Nasdaq-100 (July 7, 2026), and the Nasdaq Composite. However, the S&P 500 has retained its existing eligibility rules, leaving SpaceX ineligible for inclusion for at least its first year as a public company.
“SpaceX creates a dilemma for index providers,” explained Roberto Steri, associate professor of empirical finance at the University of Luxembourg, in a written answer to Paperjam. Exclusion can make a benchmark unrepresentative; rapid inclusion at a weight disconnected from available shares can make it difficult to replicate and shift risk to index-fund investors. A defensible solution is rapid recognition in a market benchmark, with phased weighting as free float and liquidity increase, he argued in a written Q&A session.
Sylvain Barrette: What exactly should an index reflect?
Roberto Steri: —“Market capitalisation can mean the full value of the company, the capitalisation of its listed share class, or the free-float value investors can buy. For SpaceX they are very different.
SpaceX placed about 638.9 million Class A shares after the overallotment option, against more than 13 billion shares outstanding. Approximately 7.8 billion shares, including roughly 6.4 billion owned by Elon Musk, are restricted beyond 180 days. The ordinary pool is released in stages during 2026, while much of the extended pool remains restricted into 2027. Eligibility for transfer does not mean sale or free-float classification.
Will indices reflect SpaceX’s full size by year-end?
R.S.: —“Not fully, and the answer will vary by provider. Nasdaq uses the lesser of eligible listed market value and three times eligible free-float value when float is 33.3% or less. Above that threshold, the full eligible listed capitalisation can be used. The Nasdaq-100 could therefore recognise much more of SpaceX by December if the measured float rises. It still would not reflect SpaceX’s full economic capitalisation, including controlling shares and much of the extended lock-up pool.
S&P retained its profitability, seasoning and minimum-investable-weight requirements. Major passive benchmarks may therefore provide very different SpaceX exposure.
Will market-cap-weighted indices become more volatile?
R.S.: —“A modest increase is plausible, but not automatic. If SpaceX has an index weight w, its direct contribution to index variance includes w-squared times its own variance, plus the covariance between SpaceX and the rest of the index. The square on “w” matters: even a very volatile stock need not transform a broad index if its weight is modest.
The covariance channel may be more important. SpaceX is likely to trade partly as an AI, technology, defence and long-duration growth exposure. If it moves with already large technology constituents, it reinforces an existing common factor rather than diversifying it. The effect should be stronger for the Nasdaq-100 than for a broad, float-adjusted index.
Academic studies highlight further channels. Inclusion can increase co-movement without a change in fundamentals, while benchmark-relative trading and ETF arbitrage can raise volatility and excess correlation (Barberis, Shleifer and Wurgler, 2005; Ben-David, Franzoni and Moussawi, 2018). The likely outcome is not a dramatic permanent rise in broad market volatility but more volatility around inclusion, reweighting, earnings and unlocks and greater AI growth concentration.
Is Nasdaq making a mistake?
R.S.: —“There is a legitimate argument for Nasdaq’s decision. A benchmark should describe an investment opportunity set. Omitting a very large, listed company for months can make it unrepresentative. In a strong AI market, an active manager could appear to generate alpha merely by owning important companies excluded from the benchmark.
This does not mean that high risk guarantees high expected returns. A risky company may already embed very optimistic expectations. The provider should not decide whether SpaceX or AI is overvalued; its task is transparent rules on representation, free float, liquidity and replicability.
The Nasdaq-100 is not merely a descriptive statistic: it underlies hundreds of billions of dollars in ETFs and other tracking products. When benchmark demand meets a small float, the index rule itself can affect the price at which funds buy. Academic studies generally find price pressure around additions. Recent work on fast-track IPO inclusion suggests anticipated demand can lift prices before inclusion and partly reverse afterwards (Murray and Sammon, 2026).
Nasdaq prioritises rapid representation and accepts more implementation risk. S&P prioritises consistency, seasoning and investability while accepting temporary omission. Both choices are defensible; neither is neutral.
Will the unlocks inevitably cause poor fourth-quarter performance?
R.S.: —“The unlocks may create selling pressure, but poor fourth-quarter performance is only one possible outcome. An unlock permits sales; it does not require them. Supply will depend on holders’ needs, fund constraints, the share price, operating news and demand. Part of the expected supply may already be priced in.
Academic studies highlight a genuine risk: lock-up expirations tend to increase volume and can be associated with negative abnormal returns. With limited float, disagreement and short-sale constraints, optimistic investors may dominate price formation; as float expands, that effect can weaken and the price can fall (Field and Hanka, 2001; Hong, Scheinkman and Xiong, 2006).
SpaceX’s staggered schedule reduces the shock of a single cliff but creates repeated supply events. The Q3 release may be important because it frees another 28% of the ordinary pool. The unlocks create a plausible fourth-quarter headwind and may amplify volatility, but do not make poor performance inevitable. The index effect remains proportional to SpaceX’s weight.
What are the unintended consequences of rapid inclusion?
• Index funds may buy when early shareholders gain liquidity. Nasdaq-100 funds must buy at the weight set by Nasdaq, whether managers consider the price attractive. If reweighting occurs near lock-up releases, benchmark demand may support sales by early holders. The resulting risk is borne by fund investors.
• A price-weight-demand loop may develop. A higher price can raise market capitalisation and, at the next review, the index weight. Tracking funds must then buy more. With a small float, this loop can be unusually strong.
• Companies may structure their listings to obtain index demand. Issuers may choose the exchange, share classes, float and lock-ups partly to qualify sooner or obtain a larger weight rather than solely for governance or financing reasons. Academic work calls this a benchmark-inclusion subsidy (Kashyap et al., 2021).
• Unrelated constituents may be affected. A fund receiving no new cash must finance its SpaceX purchase by selling existing holdings. A large addition can create pressure in companies with no connection to the IPO and alter sector weights.
• The index may look diversified while becoming more exposed to one theme. If SpaceX moves with mega-cap technology stocks, adding it may provide little effective diversification. The portfolio may remain sensitive to AI spending, technology valuations and long-term rates.
• Passive funds may deliver different outcomes. Providers use different rules for seasoning, profitability, liquidity and free float. Similar US benchmarks may therefore deliver different SpaceX exposure, concentration and volatility.
• There is also a rule-making concern. If the methodology changes shortly before a large IPO that benefits from the change, investors may struggle to distinguish general policy from special accommodation. Tracking funds also has less time to estimate purchases, market impact and costs. Advance notice, consultation, simulations and consistent application would improve credibility.
What is the benchmark dilemma in the AI era?
R.S.: —“The case for inclusion is not that AI stocks are certain to earn high returns but that excluding important companies introduces an active sector bet. During an AI boom, such a benchmark may be easy to beat; during a correction, the omission may make it look unusually defensive.
The case for caution is that benchmarks are investable. Their rules cause real trades by ETFs, pension funds and retail savings products. Immediate full-weight inclusion can force investors to buy before price discovery has matured and while float remains scarce.
One solution is to separate measurement from investability. A market-representation index could add SpaceX quickly, while an investable index used by ETFs could introduce it gradually. Nasdaq would set the phase-in rule, limiting each increase so required purchases are not too large relative to available float or normal trading volume.”
Conclusion
Steri argued that SpaceX tests what an equity index is meant to be. If it is mainly a map of economic importance, rapid inclusion is sensible. If it is a portfolio that large amounts of savings must replicate, genuine float and implementation capacity deserve equal weight.
An index provider should not exclude a company because it believes the shares are overvalued, but an investable index should not treat locked, controlling or strategic holdings as ordinary public float. The most defensible answer is transparent, issuer-neutral and phased inclusion.
