The SpaceX IPO Is Finally Here: This Is When It Might Be Coming to Your S&P 500 ETF
Key Points
Currently, the S&P 500 requires a 12-month "seasoning" period before including stocks in its index.
Proposals were made to allow exceptions for the "mega-IPOs" SpaceX, Anthropic, and OpenAI.
The committee chose not to make any changes to the rules. This means investors will need to wait at least a year before SpaceX joins the S&P 500.
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Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, officially became a publicly traded company on Friday, June 12, in what was the largest initial public offering (IPO) ever.
From the exchange-traded fund (ETF) industry's perspective, the natural question is when the stock will start showing up in the biggest funds. For ETFs tracking indexes, it's really up to the index providers' rules as to when new issues qualify for inclusion. Some can begin adding stocks like SpaceX in just a few days. Others require a longer wait.
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S&P Dow Jones Indices made the somewhat surprising decision earlier this month that it would not be fast-tracking high-profile mega-IPOs into its indexes.
Image source: Getty Images.
The current rules applied by S&P Global (NYSE: SPGI) call for a 12-month "seasoning" period. It basically calls for new issues to trade on an eligible exchange for one year before being considered for addition to an index.
There was a proposal made to shorten that period from 12 months to six months. Or in the case of some mega-IPOs, to shorten it even further. In the end, the committee decided to make no changes to its index rules.
There will still be a 12-month waiting requirement along with the existing net income qualifier. This piece requires companies to have positive net income for both the most recent quarter and the sum of the four most recent consecutive quarters.
The takeaway: Barring any changes, SpaceX won't be showing up in the S&P 500 for at least one year.
The primary S&P 500 ETFs affected by this ruling are:
- Vanguard S&P 500 ETF (NYSEMKT: VOO)
- iShares Core S&P 500 ETF (NYSEMKT: IVV)
- State Street SPDR S&P 500 ETF (NYSEMKT: SPY)
- State Street SPDR Portfolio S&P 500 ETF (NYSEMKT: SPYM)
If you're looking for ETFs where SpaceX could show up quickly, choose ones that track a CRSP, FTSE, or Russell index. Their rules allow for inclusion following the fifth trading day post-IPO.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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