The S&P Dow Jones Indices decided not to change its guidelines for when “megacap” companies like SpaceX, OpenAI, and Anthropic are included in its stock indexes, terminating a proposal it had floated in April to fast-track the three companies.
The idea had been to shorten the “seasoning period” so that megacap companies, which S&P defines as the 100 largest in its Total Market Index or roughly $157B in market cap, could join soon after going public. Instead, the committee left its rules untouched, which means the three most hyped IPOs of the year will still go through the same purgatory as other companies that go public.
Historically, to qualify for the S&P 500, a company has to trade publicly for at least 12 months, post four consecutive quarters of positive GAAP earnings, and have enough shares floating in the public market — criteria which all three companies fail on multiple counts. None of the companies have traded for more than a year, none are profitable, and SpaceX plans to only float small slices of its shares.
On April 30, S&P Dow Jones Indices opened a “Consultation on the Treatment of MegaCap Companies” public consultation, where it proposed cutting the seasoning period from 12 months to 6, waiving the four-quarters-of-profitability requirement, and waiving the public-float minimum. Its job is to keep the S&P 500 representative and useful to trillions in funds that track it directly or are benchmarked to it, and the conversation was centered around whether waiting a year or longer to include companies of this unprecedented size would be unrepresentative of the market. Ultimately, they decided to reject all three rule changes and keep things as-is.
Why does it matter if they're included or not?
Inclusion in major index funds releases a tidal wave of forced buying. Every index fund and ETF that tracks the S&P 500 has to buy a stock the moment it joins, regardless of price. Bloomberg Intelligence estimated that automatic demand at around $14B for SpaceX, more than $8B for OpenAI, and about $4.6B for Anthropic. Getting in early would have meant billions in guaranteed inflows, which immediately impacts the retirement savings of ordinary Americans. Roughly $7.5T in 401(k)s, pensions, and index funds passively track the S&P 500, which means that the day one of these companies joined, tens of millions of people would automatically own a slice of it, bought at whatever price the market set, profitable or not, whether they wanted that exposure or not.
The flipside of the coin is that it means S&P investors sit out on potentially the biggest growth story of the decade, while rivals like Nasdaq and FTSE Russell, which loosened their own rules, scoop up the IPOs within weeks.
Obviously there are pros and cons to the average American retiree having exposure to these stocks, but as someone who's bearish on the current market value of these AI companies, I think they came to the right decision.
