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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.
