Here's How SpaceX's IPO Will Affect S&P 500 and Nasdaq-100 Investors
Key Points
SpaceX aims to raise $75 billion in its June 12 initial public offering by selling 555.5 million shares.
SpaceX's ticker will be fast-tracked into the Nasdaq-100 index, skipping some requirements other stocks must meet.
The S&P 500 reversed course on its decision to fast-track SpaceX into the index.
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With SpaceX's initial public offering (IPO) expected on June 12, the company has been dominating investment headlines. As it stands, it's planning to raise around $75 billion by selling 555,555,555 shares at $135 each.
With an expected valuation of over $1.77 trillion, SpaceX will instantly become one of the most valuable public companies in the world. So, with major indexes favoring larger companies, how will the S&P 500 (SNPINDEX: ^GSPC) Nasdaq-100 be affected?
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For a bit, the S&P 500 Dow Jones Indices -- which manages the S&P 500 -- was considering altering its rules to fast-track SpaceX into the index. This was unsurprisingly met with significant backlash, and on June 4, it announced it wouldn't change the criteria after all.
SpaceX will need to check three boxes before joining the S&P 500:
- Trade on the market for at least a year;
- Have consistent profitability;
- Maintain a certain public float (shares available to everyday investors).
Nasdaq, on the other hand, did make changes that will make it much easier for SpaceX to be included in the Nasdaq-100 index (roughly the largest 100 non-financial companies on the Nasdaq exchange) as soon as 15 days after the IPO occurs. This means that if you currently own shares of a Nasdaq-100 exchange-traded fund (like the Invesco Nasdaq-100 ETF (NASDAQ: QQQM) or Invesco QQQ ETF (NASDAQ: QQQ) ), you'll automatically gain exposure to SpaceX whenever it's added to the index.
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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