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HAVE YOU GIVEN any thought to what’s about to happen to your S&P 500 tracker?
Three enormous IPOs are expected later this year: SpaceX, OpenAI, and Anthropic. Based on their most recent private transactions, SpaceX appears to be valued at around $1.25 trillion, OpenAI at roughly $800 billion, and Anthropic at approximately $380 billion. Combined, we could be looking at close to $3 trillion in private market value that wants to go public. To put that in perspective, the entire S&P 500 is worth roughly $60 trillion. That’s not a routine year for markets. That could be a very large event indeed.
I suspect the vast majority of people with money sitting in a tracker fund have absolutely no idea it’s coming. Those that do might have read some of the more sensational claims I’ve seen about immediate, disruptive wholesale change to the S&P 500. I think those articles are getting ahead of themselves. These companies might not automatically land in your S&P 500 tracker the day they list.
The index has hard rules, and two of them seem particularly relevant. A company generally needs to have been profitable for four consecutive quarters before it qualifies. OpenAI and Anthropic are both, as far as we can tell, burning through enormous amounts of capital. They may well not meet that bar at IPO. There’s also a float requirement, where roughly half of a company’s outstanding shares typically need to be publicly tradeable.
These businesses will almost certainly debut with tiny floats, possibly somewhere between 5% and 10% of shares in public hands. That could disqualify them from day one. SpaceX is possibly the closest to profitability of the three, but the float issue likely applies across the board. One area of uncertainty is the selection committee. This has some discretion around the inclusion of larger IPOs. They could choose to move faster than the rules imply.
So the story might not be your tracker being immediately and dramatically restructured. The story could be more drawn out than that, and perhaps more interesting for it.
What does this mean in the short term? I can only offer informed speculation.
To my mind, volatility seems likely around the listings themselves. Not necessarily because of forced index rebalancing, but because the float issue creates its own kind of pressure. Enormous companies carrying enormous implied valuations, but only a sliver of shares in circulation. Limited supply, near-unlimited institutional demand, and a market full of retail investors who’ve been reading about these companies for years and finally get their shot. I would guess we should expect wild price swings during those early trading days, though I could be wrong about the scale of it.
Rotation risk is worth watching too, I think. Investors might pull money out of existing AI bets, the likes of Nvidia and Microsoft, and move it directly into OpenAI and Anthropic the moment they’re publicly available. If that happens, the stocks that have driven your tracker’s returns for the last three years could face sustained selling pressure, not because anything’s wrong with those businesses, but simply because a shinier, newer version of the same trade has just arrived.
A throwaway thought for anyone holding individual shares rather than trackers. The companies most at risk of ejection are those sitting at the bottom of the index. When a business loses its S&P 500 membership, every passive fund becomes an automatic seller. That can hit the share price hard, nothing wrong with the company, just forced selling as a side effect of something big happening at the very top. Worth knowing if any of those smaller names are in your portfolio.
Medium term it could get more interesting still.
If and when these companies do meet the profitability and float requirements, which could, I think, be years after their IPOs rather than months, every S&P 500 tracker on the planet becomes an automatic buyer. Hundreds of billions flowing into SpaceX, OpenAI and Anthropic whether fund managers want it or not. The mechanics of passive investing would turn every tracker holder into an investor in these three companies with absolutely no say in the matter. That’s the bit people rarely stop to think about. Passive investing isn’t neutral. It just means someone else is making your decisions for you.
Then I come to the big question: do these businesses actually deserve these valuations? It’s worth noting that every major IPO of recent years has tended to trade down from its private valuation once the public gets a proper look at the books. The venture capital guys who set those private prices aren’t always right, and public markets have a habit of finding that out fairly quickly. If the same happens here, your tracker should hopefully be buying them at a fair price by the time they filter into the realm of inclusion within that tracker. It has to be said, that’s not guaranteed.
I’m not trying to be alarmist. These aren’t penny stocks being hyped and I think that matters. OpenAI’s revenue had already surpassed $20 billion by the end of 2025. SpaceX is targeting what could be the largest public offering in history. Anthropic has BlackRock, Blackstone, Microsoft and Nvidia on its books. These are real businesses generating real money with the biggest and most sophisticated names in global finance and technology behind them. That doesn’t make them cheap at these prices, but it does make them a very different proposition from the usual IPO hype cycle.
The bottom line for the average investor? We probably don’t need to do anything dramatic. But it doesn’t hurt to understand that the passive, set-and-forget vehicle you own may look quite different over the next few years, not necessarily in a single sudden lurch, but gradually, as these companies either earn their way into the index or don’t. The index you bought into always changes but the next few years will definitely see bigger changes than normal.
If nothing else, it’ll be interesting to see what happens going forward…Eyes open.
Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
Timely article. IPO announcement this week as the possibility raised by Barron’s: https://www.barrons.com/articles/spacex-ipo-tesla-stock-elon-musk-533bfd95?mod=hp_minor_pos22&_gl=1*127t00u*_gcl_au*NTgwMjcyODExLjE3NzQ0Mzg2NzU.*_ga*MTUyMjYwMDAzNy4xNzY2NzAxOTkx
That’s very interesting. It seems like the valuation target is higher than I suggested, $1.5 to $1.75 trillion, with possible priority access for Tesla shareholders. I’m going to kick back and watch the show!
Reuters reported:
As of March 2026, Elon Musk’s SpaceX is planning an initial public offering (IPO) expected in 2026, with reports indicating that the company is seeking to change stock exchange and index rules to allow for rapid inclusion in major benchmarks like the Nasdaq-100 and S&P 500.
Will he be able to change the rules?
Honestly? I have no clue, this is way above my pension pay grade.
I can give you my opinion and thoughts: to my mind, Musk will play the S&P Dow Jones off against Nasdaq, with the prize being a trillion-dollar-plus listing. Both exchanges will want the business. My experience of human nature suggests that when that much money is on the table, principles have a habit of becoming surprisingly flexible. I wouldn’t be shocked if both sides end up compromising their own rules to win it.
Maybe that’s cynical. But here’s what I think: If the rules do change, they’re changing because one extraordinarily powerful individual pressured two competing institutions into rewriting them. That sets a precedent. And precedents, once set, tend to stick around. For the average Joe like us, that’s something worth watching. The index rules that exist today have a reason, they were designed to protect the integrity of the benchmarks that millions of ordinary people’s savings track. If those rules get rewritten under pressure, in a hurry, to accommodate a single listing, it’s worth asking who that actually serves? … .I’m not convinced it would be us, the average investor…but as I mentioned, I’m very cynical. I have experience with the million dollar temptation, not the billion or trillion dollars, I can’t see it being any different, the zero’s become irrelevant eventually.
Mark, what are your thoughts on the appearance of these newly public stocks in total market index funds?
If I’m not mistaken, Tesla appeared in Vanguard’s Total US Stock Market index fund before it was added to the S&P 500.
Could the same situation be in store for these upcoming mega-IPOs?
That’s a good point and one I didn’t cover, so thanks for flagging it.
You’re right about Tesla. Total market index funds, the kind that aim to capture the entire US equity market rather than just the S&P 500, operate with simpler inclusion rules. No profitability test and no float committee.. List on a major exchange, meet basic liquidity requirements, and you’re broadly in.
So yes, these companies could appear in a total market fund like Vanguard’s VTI fairly quickly after listing. Thinking on my feet, the float problem I described in the article doesn’t disappear just because the door opens sooner. Both index types weight their holdings by free-float market cap, so with only 5-10% of shares likely available at IPO, SpaceX might show up in your total market fund almost immediately. You’d own it before you knew it, but you wouldn’t really feel it. Not yet.
The real trip wire, for both fund types, is probably when the float expands meaningfully. That’s when passive exposure stops being nominal and starts being something you’d actually notice in your portfolio.
So your instinct is sound. Total market investors will most likely get to the party earlier. Eyes open I suggested…Apparently I should have opened mine a little wider and thought a little broader!
Oddly, the emailed newsletter attributes this article to Ed Marsh and the website to Mark Crothers. And to me, the style and content doesn’t seem to fit that of either of these two fine contributors.
Sharp eye, Ken. Sharon and I were up early to watch the sun rise over our walk on the beach, and I’ve been on the go until now.
There was an error in the email sent this morning. This is totally my fault. Mark Crothers is the one who has contributed this article. This is unacceptable and I will do better.
Hands up, I’m guilty, this one’s mine. I wrote it trying to be more analytical. Article rather than forum post, stepping up the prose and toning down the voice.
Strangely enough, I answer to a remarkable range of names. Pops. Crow. Marcus. Big Lad. Idiot. Between them they cover affection, physical description, and a fairly honest character assessment. So being attributed as Edmund made a nice change. Wrong, obviously. But pleasantly wrong. Edmund suggests someone who owns a writing desk. Someone with intelligent opinions rather than my normal rambling…I’ll take it 😉
Mark, I own the name but not the desk, and I’ll leave the assessment of my intelligence to the opinion of others.
Edmond, your prose and the wisdom within it say everything I need to know. And contrary to what I suggested earlier, I do actually own a desk — I just haven’t gotten around to dismantling my home office since retiring. You’d think I’d have all the time in the world for it, yet somehow something more interesting always seems to come up.
Mark, your chameleon-like writing effort produced a commendable piece while pulling the wool over my eyes. Maybe sometime you can delve into the virtues of physical therapy in an article and have Bogdan attribute it to Quinn to keep us on our toes.
That would be a splendid conceit! Now I just need to get busy convincing Bogdan of its merits.