The IPO market is about to wake up. Hotly anticipated listings this year are forcing index providers into some tough choices that could send ripple effects across the fund management industry. Nasdaq has already made a change.
SpaceX is expected to be the largest initial public offering ever when it officially lists in the coming months. Its possible $1.75 trillion market cap is prompting some index providers to reconsider how soon they allow newly public companies into their flagship portfolios.
Index Implications
Market-cap-weighted indexes like the S&P 500, Nasdaq-100, and Morningstar US Market Index all aim to accurately represent a broad swath of the US stock market. An index must hold all stocks in that swath to fully embody it, and excluding even one stock could cause index fund investors to miss out. Active managers would be compared against an incomplete benchmark, too.
In many cases, this is fine, and investors shouldn’t think too hard about it. Few indexes actually hold 100% of stocks in their target market segment all of the time. Rebalances, inclusion rules around liquidity and trading, or other technicalities prevent certain stocks from entering an index’s portfolio even if the stock in question appears to be a logical fit. Tesla TSLA, for example, traded publicly for more than 10 years before finally meeting the S&P 500’s profitability requirement for inclusion in 2020.
The implications of omissions are usually minor. Save for Tesla, these are typically very small companies whose position in a total market-cap-weighted index fund would be negligible. In fact, Dimensional Fund Advisors often keeps many of these extremely tiny firms in its indexlike actively managed funds because the cost of selling the minuscule position is greater than the puny impact the stock may have on fund performance.
Large stocks are a different story. Omitting SpaceX for any time would be a big deal, just as the S&P 500’s omission of Tesla was a big deal. Same goes for OpenAI, Anthropic, and other multibillion-dollar or trillion-dollar private firms when they list publicly. Any of these stocks would instantly be among the largest in the United States. An index aiming to accurately represent the contours of the US stock market should hold all important stocks.
Public Market Concentration
Public and Private Market Concentration
The Morningstar PitchBook US Modern Market 100 Index illustrates that SpaceX, OpenAI, and Anthropic would instantly be among the largest publicly traded companies in the United States and that their inclusion in a broad-based index would slightly reduce concentration at the top of the market.
Concentration will still be very high when these firms list publicly—the Modern Market index stashes over 50% of its portfolio in its 10 largest companies—but it will redistribute assets to these newly minted mega-caps.
Once public, index funds will quickly buy up large amounts of these firms’ stocks to maintain an accurate representation of their target index and the market that index tracks. The timing of those buys depends on the index. Index funds rarely buy a stock in its first few days of trading, and anticipated stock additions to major indexes can spark abnormal trading activity, too. It’s important that indexes are careful about which stocks they let in and when.
While indexes typically require at least three months of seasoning before adding a newly public company to their indexes, upcoming mega IPOs could see some shorten the wait. Here’s how several index providers may handle upcoming listings of SpaceX, OpenAI, and Anthropic.
Nasdaq’s Response
Nasdaq was the first to consider a rule change that would grant mega IPOs like SpaceX early admission to its flagship Nasdaq-100 index. The exchange and index provider began a consultation period in February to assess the viability of and industry response to a proposed “fast entry” rule. The change was approved on March 30 and will be effective on May 1.
The rule clearly targets only the largest IPOs. For fast entry, a newly public company would have to rank within the top 40 holdings of the Nasdaq-100 index. At the end of February, Intuit INTU was the 40th largest stock in the portfolio of Invesco QQQ Trust QQQ and had a market capitalization of USD 113 billion. Any IPO to surpass Intuit’s market cap would be the largest ever in the United States, and it’s possible that five companies—SpaceX, OpenAI, Anthropic, Stripe, and Databricks—will fetch a higher public market cap if they list this year.
Nasdaq will still wait 15 trading days before adding any IPO to its flagship index to avoid early volatility in those stocks’ prices. This makes it easier and cheaper for index funds to implement any adjustment. Still, there is little precedent for such a large addition to an index so early in a stock’s life, so expect some unusual activity in SpaceX’s first month of trading.
FTSE Russell’s Response
FTSE Russell is also considering a fast entry rule for its suite of US market indexes and is in a consultation period as of early April 2026. Similar to Nasdaq’s recently approved change, FTSE Russell’s fast entry rule would only apply to sizable IPOs and is in direct response to anticipated large public listings this year. FTSE Russell estimates sizable IPOs may have a market cap greater than around USD 14 billion.
The index provider’s suite of US equity indexes, which includes the Russell 1000 Index, currently grants IPOs entry at each scheduled quarterly rebalance, but only if the stock also meets certain other eligibility requirements.
S&P’s Response
S&P is reportedly considering a fast entry rule change to its flagship index, though it has not yet been approved, and details are scant. The S&P 500 index requires companies to have been public for at least 12 months with four consecutive quarters of positive earnings to be eligible for inclusion.
Any rule change would be a watershed moment for this famous index. An unnamed committee decides which companies are eligible, and rule changes are almost unheard of. The committee tends to follow rules outlined in the index’s methodology, but there is still a level of discretion and opacity to the committee’s process.
Regardless of when the committee grants SpaceX admission, trillions of dollars of index fund assets tied to the S&P 500 will rebalance. Further, the myriad active managers who maintain some mandate to that index may also have to adjust their portfolios to reflect the change in benchmark composition.
CRSP
The Center for Research in Securities Prices is the only one of these index providers that already allows IPOs ahead of any scheduled rebalance. CRSP allows new IPOs into its suite of market indexes after five trading days, so long as they pass the index’s eligibility and investability screens.
Since over USD 3 trillion in Vanguard index funds track CRSP US market indexes, eligibility and investability screens are crucial. Quickly adding new IPOs to an index allows that index to better reflect its target market, but the point is moot if funds aren’t able to efficiently buy or sell the newly public stock.
Bending the Rules
Adjusting index rules to reflect the times is logical, though it appears that some index providers are stepping back from certain traits of great indexes to allow for the inclusion of very large IPOs.
The best indexes require portfolio companies to have a minimum percentage of shares freely traded on the secondary market, or float. Limited float makes it challenging for index funds or other investors to efficiently buy or sell shares of a company. For index funds, this is critically important since many billions of dollars trade hands during their periodic rebalances.
FTSE Russell is considering relaxing its already-low 5% minimum float requirement for large IPOs.
Nasdaq restructured its 10% minimum float requirement to remove a strict exclusion of low-float stocks and will instead reduce the weighting of those stocks. Practically, it means that SpaceX may not be a top 10 holding in the Nasdaq 100 if it doesn’t meet the 10% float threshold. Its market-cap weight will be reduced to accommodate its smaller float.
CRSP currently requires a minimum float of 10% for fast-entry IPOs but will soon ease that requirement. On April 27, CRSP will add a float-adjusted market-capitalization test for adding or dropping a stock. This could allow mega-IPOs into their broad-based indexes even if they begin trading with relatively few available shares, which would have amounted to a USD 3.3 billion float-adjusted market cap as of December 2025.
It’s unclear how many tradable shares SpaceX, OpenAI, and Anthropic will debut with. Regardless, index providers appear increasingly keen to open their gates for them as soon as possible.
Morningstar acquired the Center for Research in Security Prices in February 2026.
