[hubraumhugo]

With SpaceX, OpenAI, and Anthropic, we're likely to see 3 of the largest IPOs ever (by a wide margin) this year. Will existing institutional investors trim other positions to allocate a lot of capital for these mega listings or is this not a concern?

[thewebguyd]

Most likely. Funds generally don't have much unallocated cash, they operate fully invested, so three huge IPOs will force an asset rebalancing which can cause some liquidity drain from the rest of the market.

Plus as insider lockup periods expire, that's a ton of dollars pulled out of the market and into safer assets. It's going to be a huge net exit of capital.

I'd expect a lot of volatility and pretty heavy downward pressure across the rest of tech.

[nemomarx]

At least all the index funds are obligated to, right?

[qwytw]

Based on current rules they wouldn't included in the S&P 500 for at least several years even based on optimistic scenarios.

Of course IIRC they looking into tweaking the rules to allow some handpicked extremely unprofitable companies in, due to "reasons"....

[s1artibartfast]

They are scared of underperfoming the market and failing to exist as an index. Losing money with everyone else is a more sustainable risk than losing money while other indexes go up.

[bluGill]

Maybe. If you read the fine print they are not. They have the goal of matching the index returns, but they never say anywhere they have exactly the stocks in the index.

Index funds all make active choices and often hold companies not in the original index. They are more passive than a traditional funds that buys and sells all the time, but they still make active choices. When an index changes stocks they can look up the price - but the funds mirroring the index need to make real trades that if not carefully done will change the value of the stocks (and cause the fund to under perform the index), so index funds have plans to prevent this. Compared to a traditional fund an index fund looks passive and there is much much less for the manager to do - but that doesn't mean the managers do nothing.

[chilipepperhott]

Most index funds wait for at least a year before adding a new listing. The only exception that I'm aware of is QQQ and SpaceX.

[ac29]

Not true for Vanguard's total US stock market fund (VTSAX/VTI), the largest total US stock market fund in the world. Their CRSP index only requires 20 trading days post IPO, or 5 for large caps (this has been true for many years, this is not a recent change)

[chilipepperhott]

Sure, but how often do they rebalance the fund?

[exabrial]

Holy shit. With VTI being a monster, how have they survived this long?

[nemomarx]

vti slightly out performs s&p I think? or it has for the last few decades for sure.

[qwytw]

Technically they couldn't be added to the S&P 500 etc. until they become profitable.

[nemomarx]

If space x gets an exception, why wouldn't anthropic?

[outside1234]

But only the amount the company floats for many index funds. So in the case of SpaceX, they are only floating 5% of the company. So the number of shares something like VTI has to buy is much smaller than the total market cap (5% of it).

[DenisM]

company must have a history of profitability before being included in the S&P 500

[nly]

Index funds follow indices and often only rebalance quarterly

[whateveracct]

you and me will all be left holding a small cut of the bag

[bugsense]

It also means the equity in any 2021-2023 minted unicorn is worth zero.