[rybosworld]

Definitely not.

What Spacex/Elon are doing is sketchy as hell. But the numbers involved here are not terribly meaningful for your portfolio.

At IPO, $75B of Spacex shares will be bought/sold. The S&P 500 uses float-adjusted weightings, and the current float-adjusted total is $54T. If you are 100% invested in SPY, then about 0.14% of your holdings will be spacex on IPO day (75B/54T~=0.14%).

Obviously Musk and friends will start dumping some of the locked up float (~1.65T) when they can. But they definitely will not be doing so in a way that crashes the price or the market. That's in nobody's interest.

If you assume that half of the shares end up as float eventually (post-lockup), you'd end up owning around 1.6% of spacex in your S&P 500 etf (875B/~55T~=1.6%). That's not nothing but it's not significant enough that you should consider liquidating your 401k.

I'm picking on Spacex specifically because they are the biggest and imo, have the sketchiest/worst finances of the 3.

[mlsu]

I think the idea here isn't the absolute numbers, but that if Elon manages to successfully fleece everyone's retirement, it will collapse confidence in the market, which could wipe out far more value than SpaceX alone.

IF SpaceX is actually worth 400-500bn and it's a few hundred billion dollars of fleece, sure, that's a "small" amount (still.. lord almighty it is never enough for these people). But the hazard is that it is a fleece. That would shake confidence in the system, the bear case is basically unlimited at that point.

[DanielHB]

I dunno won't index funds be forced to sell other stocks to buy these IPOs? Won't that possibly trigger a market crash if the IPO stocks loses a lot of value very fast after the IPO on top of investors predicting this fact and selling shares of other companies?

I dunno, the logical explanation makes sense, but markets don't work on logic especially on the short term. People fearing what other people will do and act in anticipation is known to happen.

[bluGill]

Read the find print, but probably not. Index funds are aware of the issue you raise and they all have plans to handle it. Plans range from "not a problem, ignore", to "we don't even try to have the same stocks as the index, just similar stocks that we think will match the index performance". Most are someplace in between those extremes.

[rybosworld]

Yes selling will happen, and in the case of the S&P 500, it will be weighted selling across the whole index.

Spacex/Anthropic/OpenAI almost certainly won't crash the market. The most probable thing to happen is that all 3 of these rally a surprising amount on their opening day, because there will be so much forced buying of the shares.

In my opinion, the most likely bagholders will be any retail traders that buy these stocks before the lockups expire.

I think it's very likely that we see the following:

IPO day -> all 3 close higher than opening price.

1 month -> price settles into a range 20-30% higher than IPO price.

6-12 months -> price is back near IPO price +-5%. Anyone who bought and held in the first 3 months has unrealized losses.

[DanielHB]

Didn't every single large IPO in the past 15 years tanked the stock in the short term compared to the IPO time? Why wouldn't that happen again?

[rybosworld]

Not completely sure what you mean by "short term compared to the IPO time"

IPO's fairly reliably pop on day one. The performance in the first 6 months is mixed but skews slightly negative.

But the size of these 3, combined with the rule changes that are allowing them to be included in the indices much quicker than normal, means this time is very different than what we've seen before.