This percentage directly determines the influence on SP500 index funds holders (SPY, VOO, etc.).
The outcome could have been:
1. not included (0%)
2. included, weight by free float (0.3%) --- 54th in the list between $AXP and $MCD
3. included, weight by free float x 3 (0.9%) --- 19th in the list between $ORCL and $JNJ
4. included, weight by market cap (1.75 trillion / 67 trillion = 2.6%) --- 8th in the list between $AVGO and $META
https://www.slickcharts.com/sp500
#2 is _much_ closer to #1 than #3 (let alone #4), meaning that had an exemption been made to allow SpaceX in, given the rest of the existing rules, at least the impact to ETF holders would not be outblown. The same could not be said for NASDAQ , which was the main source of all the debate.
I can partly see the rationale - existing stockholders will want to ditch their stock ASAP to cash in on the artificially elevated prices, and so there's a good chance the free float will increase quicker than the index can capture it, but this rule change will be driving those sales. It's all a scam.
I'm glad a good chunk of my US holdings are in S&P tracked ETFs because they won't include SpaceX until it's ready, but another 25% of my funds are in funds tracking FTSE global indices (so equivalent to about another 15% in US), and I haven't yet found a good alternative to those. I might end up having to switch to separate UK, S&P 500 and global ex-US, but making that switch would probably cost me as much as just sucking it up and being forced to buy SpaceX.
Even with linear scaling, being one third of the way between two numbers is not what I would call underlined-much closer. But zero punches above its weight here. Those extra orders of magnitude should make some impact on the scale.
I'm sure you know this, but the rules have been changed many times over the years. Now that companies IPO much later with huge market caps, I suspect we'll see more rule changes over time. The S&P 500 is fairly conservative, so they held tight this time. If these companies are still 1T+ 12 months from now, there will be a very strong argument that the market has decided these companies are important regardless of current profitability, and the S&P will likely have to revisit.
These are not valid arguments. The companies that get added to the S&P are always owned in some fraction by rich people.
SpaceX is obviously majorly owned by Elon, but it’s also owned by regular employees, a bunch of private investors and other funds that regular people invest in.
> They're not profitable.
Right
> When they prove they're worth the dollars,
Profitable isn’t related to “worth the dollars”. You need to look at income and how much is being reinvested into growth. Amazon famously remained unprofitable due to reinvestment and waiting for them to become profitable before investing was a bad bet.
Amazon wasn't profitable because it reinvested earnings into growth, while SpaceX is funding it's growth by taking on very significant levels of debt (which will take a big chunk of future earnings just to service). These aren't comparable from a risk perspective.
Was this obvious early on?
But anyway, it's also clear SpaceX isn't doing the same as Amazon.
Sure, but we the only thing we know about the company is the current S1 filing. Need to time to see what all of that looks like. Fast tracking it and essentially forcing other people to buy without scrutinizing is the problem. They may very well be worth the money they claim, but we won't know until after they've proven it. That's what the rules are there for.
There is plenty of evidence of growth. The problem is SpaceX as it is is a conglomerate recently cobbled together, and so estimating what it is and what it's going to do is challenging.
We don't have good public numbers, but that should be over $13B in revenue and about $2B of income over the last 12 months. Given the growth trend of that 5 years, that approx. $2B of income is likely to double by the end of this year.
Add to that the space launch business around Falcon 9, which had 40+ commercial launches that generated about $4B revenue and something close to $3B of income, and SpaceX was looking strong.
Again, SpaceX isn't what it was 6 months ago, before all the xAI fuckery, but the core business, Starlink and space launch, are doing well by themselves.
Is it really owned by them if Elon retains most of the voting rights anyway?
Look at Tesla and their hard pivot to humanoid robots. He is all in on robots which about a dozen other companies already make and are largely unprofitable in making. He is betting AI rapidly improves in a way that allows robots to become rapidly more useful and there is zero evidence that is feasible in the next 5 - 10 years.
Owned by various folks. Controlled by Elon. Granted, I don't know how Texas law deals with minority rights.
Amazon met profitability requirements and went into the SP500 at around $2.40 in November 2005. Two years before it was $2.70. Six Years before it was $4.40.
Two years _after_ listing it was $4.50. Six years after it was ~$10.
Waiting for profitability seems like it was a good bet.