S&P Global keeps index rules unchanged, as SpaceX’s listing approaches
Synopsis
S&P Global has decided not to change its fast-entry rules for major stock indices, meaning SpaceX is unlikely to gain quick inclusion in the S&P 500 after its IPO. The decision is a setback for Elon Musk's efforts to secure early index entry for the space company, which is seeking to raise $75 billion at a valuation of approximately $1.75 trillion. While SpaceX may qualify for inclusion in other indices such as FTSE Russell's benchmarks, S&P 500 rules generally require newly listed companies to trade for at least 12 months before becoming eligible.
Changes to fast-track index entry rules rejected by S&P Global
S&P Global said Thursday that its fast-exit rules for fast-entry in major stock-oriented indices would not change, a blow to SpaceX ahead of likely the largest IPO.
That decision essentially eliminates a near-term entry into the benchmark S&P 500. Exceptions to the financial viability, seasoning and IWF (investible weight factor) requirements should not be based on market capitalization, S&P said.
SpaceX plans to raise $75 billion through its IPO giving it a valuation of around $1.75 trillion and putting it in the top ten most valuable listed companies in the US. Musk has made moves that run counter to the traditional IPO rules, including proposals to shift more shares to retail investors and push for early index inclusion.
The Importance of SpaceX Getting into the S&P 500
A new listing in any of the large indexes (like S&P 500) can be overwhelmingly beneficial for the company. Inclusion in the index often brings investment from passive funds and exchange-traded funds that automatically buy shares in companies added to the benchmark.
This extra demand improves liquidity, means a bigger profile to investors and can lend support to shares. But as of now, companies that go public are typically required to trade on an eligible exchange for 12 months before they can be considered for inclusion in the S&P 500 under the index's current rules.
Other Index Providers Have Started To Let The Door Open
S&P has already decided not to alter its criteria, while other index providers have shown greater flexibility. FTSE Russell recently announced new fast-entry rules making SpaceX eligible to be included in the Russell US Equity Indexes and in the FTSE Global Equity Index Series.
Analysts said the decision by S&P to stick to a law interpretation was a sign of its "rules-based" policy. Art Hogan, chief market strategist at B. Riley Wealth, said, Being rules based and making sure when a company enters the index that there is profitability, speaks well to the credibility of S&P Dow Jones Indices.
He added, if companies are so massive and have been public for a long period of time that they are not profitable, to make an exception just doesn't strike as sensible at all.
The move comes as index providers and exchanges have sought new methods for attracting major tech listings. As worries mount over the increasing number of publicly listed US companies, firms like SpaceX and AI startup Anthropic are readying for public offerings.
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