The TAM of that is under $10 billion. So even owning that entire market shouldn't get you anywhere near a trillion. Then factor in the development cost of starship which has been going on forever and still hasn't even made it to orbit.
Even the IPO filing isn't claiming the value comes from the rockets but from data centers in space which seems questionable. The real cash cow right now is Starlink but they aren't leaning into that heavily because those numbers also indicate that revenue growth might be stalling out.
If you just look at the pure numbers the case is very weak. No reason to change the inclusion rules. In fact I'd argue they never should change the inclusion rules. Let the market find a price first. Index funds are supposed to be boring and track the market. Including any recent IPO just adds chaos beyond simply tracking the overall market. It's trivial to buy some SpaceX if one wants and unlike selling your entire fund holding either doesn't trigger a taxable event at all or it's a much smaller one if you cannot avoid it.
Google when it ipo'd about 20 years ago had a market cap of $23B. It is now close to $5T. Even if it went over 10x overvalued at $230B when it ipo'd, it would still have been a good investment. That is because the internet became a large part of our economy, and Google is a major player.
If you really want to compare the two, Google had a market cap/revenue of $2B/$2.7B, SpaceX is currently $1.8T/$20B, or about 10x the ratio of Google back then.
Yeah, very pricey. Crazy ? Not sure. Do I like the valuation ? No. Would I buy more SpaceX than what will be in my equity ETF ? No. But I am not unhappy that I will own a piece when it comes out. Do I like the change in rules ? Absolutely not, but that is just the way it is. The market, over time, is, and always be a lot smarter than I am.
Many people have appreciated gains locked into their indexing products such that changing is very expensive.
The biggest issue is not SpaceX/Elon per se, but indexes bending over backwards for him and changing their indexing rules to fleece index investors.
Most IPOs perform badly, to the point where the SP500 excludes all of them for a year, and I think that is actually appropriate for an indexing product. Though they're looking to change that and their float weighting for Elon.
Though after doing some digging I am not personally meaningfully impacted since Vanguard uses CRSP, which is float weighted, so only 0.1% of that is going to be SpaceX and I can live with that.
I short the stock on the actual financials if I was exposed to it (and it was actually possible), but it's a small float and there are apparently tonnes of Elon fanboys propping up Tesla beyond belief already so I expect this to be one of the hardest to predict stocks/IPOs.
As far as the appreciated gains go, I agree with you. However, there is a strong correlation between someones wealth and how much they have in taxable. For most people, especially those that are not wealthy, their equity investments are heavily weighted to retirement accounts,so I look at this as more a rich persons proble.