[BoggleOhYeah]

This has been a thing in the CRSP indexes (ie. the benchmark for Vanguard’s VTI) forever. As long as it meets float and cap requirements, it’s inserted into the indexes five days after trading begins.

It makes sense. They intend to track the market as it is.

Though, you can definitely make the case that the popularization of index funds has allowed their holders to essentially become patsies to hype IPOs.

[calgarymicro]

> As long as it meets float and cap requirements

Even with the CRSP indexes this was recently changed to make fast-tracking for these IPOs easier.[0]

> CRSP indexes were also recently changed to better accommodate fast entry . . . Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion.

That change is notable because both Anthropic and SpaceX are planning to IPO at well under that old 10% requirement.[1] Neither would have qualified for fast-track inclusion before, but both are virtually guaranteed to clear the absolute valuation bar.

[0]https://www.schwab.com/learn/story/some-indexes-accelerate-e...

[1]https://www.economist.com/finance-and-economics/2026/06/01/c...

[BoggleOhYeah]

The person I was responding to was speaking to the fast-track concept, which has been a thing in CRSP indexes for a quite a while.

The float requirement changes are directly due to these huge IPOs only placing small amounts of float on the market. Their goal seems to be tracking the market and making this change prevents them from excluding two notable companies from their indexes.

IIRC CRSP indexes are float-weighted so they aren't going to attempt buying a ton of these IPOs anyway due to that low float.

Again. Would I have made the change? No because placing that little float on the market isn't kosher IMO.

[stockresearcher]

Strongly recommend reading this linked paper, written by CRSP folks:

https://indexes.morningstar.com/insights/analysis/bltcd8e699...

These IPOs will have minuscule impact on the indexes initially. They will have a big impact if they can maintain share price in the first ranking/reconstitution after the lockup period expires.

[BoggleOhYeah]

They will have a big impact if they can maintain share price AND the float increases due to the lockout period expiring (ie. pre-IPO owners selling off shares).

I'd like to know how the CRSP/Morningstar folks feel about the interesting lock-up period rules that Elon has inserted into the SpaceX IPO and how that jives with their analysis.

[largbae]

Won't the lockup expiry increase the float on these already-included companies, forcing mechanical buying by all the very large pool pool of folks holding these index funds? Thus creating forced buyers to maintain said share price?

[stockresearcher]

Every single index fund is different. They all have publicly available methodology guides; you can read them to understand how it works and to model various scenarios.

This particular one, the CRSP total market - which Vanguard uses for VTI - has a “modern” methodology that is thought to be very good. Once every three months they re-rank the entire market and assign weights based on the market as of a particular point in time. Then, a randomly-chosen number of days later, the fund (Vanguard) begins a weeklong reconstitution process in which they buy and sell stocks to reflect the new weights. It is intentionally a weeklong process so that the market is setting prices and not Vanguard with the size of their orders.

The lockup expiry happens, the market reacts, the market is re-weighted, the index reconstitutes. In that order. The price of the stock has to survive the increased float to force the index fund to buy lots more shares.

[throw0101c]

> This has been a thing in the CRSP indexes (ie. the benchmark for Vanguard’s VTI) forever.

CRSP has recently changed their rules:

> CRSP indexes were also recently changed to better accommodate fast entry. New IPOs are eligible for CRSP's suite of indexes after five trading days, provided they pass the index's eligibility and investability screens. Previously, these screens included having at least 10% of shares qualifying as freely tradeable (known as float shares outstanding, or FSO). However, in April the methodology changed to allow stocks with either 10% FSO or approximately $3.3 billion in float-adjusted market capitalization to be eligible for index inclusion. The weighting of stocks in CRSP indexes is also based on free float, which should help address the investability challenges associated with thinly traded stocks.

* https://www.schwab.com/learn/story/some-indexes-accelerate-e...