Impact of upcoming mega IPOs on total market index funds

[Focus]

I've been concerned about the unprecedented upcoming mega IPOs (SpaceX, Anthropic and OpenAI) and their effect on my total market index funds. Here's a Morningstar article on the topic. The story's final word: "The mega-IPOs will change the face of the US stock market. But change won’t be sweeping and won’t come all at once."

Even though I'm normally a set-it-and-forget-it guy, I might consider shifting to a mix of S&P 500 and small/mid-cap index funds for my stock portion. My understanding is that for companies to join the S&P 500, they must trade for a year and be profitable for four trailing quarters, so choosing that index fund will help me avoid the speculative, riskier post-IPO period. Anyone else pondering this? (I suspect I'll get a lot of "ignoring the noise, staying the course" responses.)

 

[RetiredHappy]

Does it really matter? Small and mid-cap have trailed large cap historically, so I am not going to chicken out of where the growth is going to be.

 

[audreyh1]

It’s been discussed somewhat on this thread

SpaceX IPO as early as June 12

Thanks for the interesting article. It reinforces the idea of not doing FOMO. I am now thinking of what to do with my BPTRX shares post IPO. Maybe try to sell into the initial bounce and use the money to buy SPCX later if the price drops. One complication is BPTRX has a sizable TSLA portion...

www.early-retirement.org

and SpaceX IPO as early as June 12

 

[Focus]

It’s been discussed somewhat on this thread

SpaceX IPO as early as June 12

Thanks for the interesting article. It reinforces the idea of not doing FOMO. I am now thinking of what to do with my BPTRX shares post IPO. Maybe try to sell into the initial bounce and use the money to buy SPCX later if the price drops. One complication is BPTRX has a sizable TSLA portion...

www.early-retirement.org

and SpaceX IPO as early as June 12

I looked at that before posting. Since it's in the Active Investing, Market Strategies & Alternative forum, it seemed to not really address my passive investing issue.

 

[mrfeh]

I understand your concern...especially spacex. Long term, I think that's gonna be a dumpster fire.

But I already tilt to small value and international, so not doing anything about it.

 

[audreyh1]

I am also riding the ups and downs. As far as I’m concerned valuations have already been extreme for quite a while in anticipation of the great AI money-making miracle.

I can’t shift without incurring large capital gains taxes. I do already have some mid, small and international index exposure so that should help further dilute the IPO jump effect.

To repeat from the other thread:

At least I found this for total market index:

CRSP US Total Market Index (Vanguard Total Stock Market): Total market indexes weight companies based on their free-float market capitalization. Because SpaceX is only floating a small fraction ($75 billion) of its overall $1.75 trillion valuation, it will enter these indexes but initially account for a tiny fraction of the fund (e.g., roughly a 0.12% weight).

But it’s supposed to be added 5 days after IPO - the new “fast track”. Nasdaq-100 I think it’s 15 days.

 

[Yipper]

I am seriously considering moving my VTI to VOO in my tax-deferred accounts to let SPCX "season" a bit before it's included in my retirement portfolio.

At some point I would think there will be selling of these locked-up shares and could also be a serious questioning of the extreme future forecasts by Mr. Musk. I also believe SpaceX and Tesla are valued mostly on the "cult of personality" and should something bad happen to him where he won't be running his companies, what happens to those investors who bought on the promise of "only Elon can do this"?

 

[mrfeh]

I am seriously considering moving my VTI to VOO in my tax-deferred accounts to let SPCX "season" a bit before it's included in my retirement portfolio.

At some point I would think there will be selling of these locked-up shares and could also be a serious questioning of the extreme future forecasts by Mr. Musk. I also believe SpaceX and Tesla are valued mostly on the "cult of personality" and should something bad happen to him where he won't be running his companies, what happens to those investors who bought on the promise of "only Elon can do this"?

Why would the tiny portion of VTI that will be SPCX lead you to make a change?

I don't disagree with you, but the difference here between VTI and VOO is miniscule.

 

[OddGuy]

NYT has a calculator to estimate how much SPCX the average retirement account will eventually have:

https://www.nytimes.com/2026/06/12/upshot/spacex-stock-ipo.html

 

[Yipper]

Why would the tiny portion of VTI that will be SPCX lead you to make a change?

I don't disagree with you, but the difference here between VTI and VOO is miniscule.

I understood VTI to be market cap weighted. At ~$2T in valuation right now, wouldn't that put SPCX up in the ~5% range pretty quickly? Or would VTI not buy up that much initially due to the amount of "float" in the market?

 

[RetiredHappy]

I used the calculator above and it shows that with $1M in VTI, it only holds $1,149 based on current amount held by public. Even if it goes to $0, I won't even notice it. Even when other shareholders are allowed to trade once lockout periods expire, it can go up say 6X, I am still not going to lose sleep over it.

 

[lem1955]

I just exchanged half of my holdings in VTSAX to VFIAX in my tax deferred accounts. It makes me very uncomfortable to know that many of the indexes are ignoring their own rules about waiting a year after an IPO (SPACEX) before including the new stock in their indexes. I'm leaving VTI as is in my brokerage account for fear of worse tax consequences.

 

[RetiredHappy]

These reactions make me think that there is a Deranged Musk Musk Derangement Syndrome going....

Updated...

 

[Chuckanut]

The whole point of a broad market index fund is to NOT have to worry about price changes in any individual stock or even an individual industry. Whatever SpaceX does in my total USA index fund over the next year or two is not worth losing a minute’s worth of sleep. Right now it’s the media darling. Big deal. Diversification is the rule.

 

[audreyh1]

The whole point of a broad market index fund is to NOT have to worry about price changes in any individual stock or even an individual industry. Whatever SpaceX does in my total USA index fund over the next year or two is not worth losing a minute’s worth of sleep. Right now it’s the media darling. Big deal. Diversification is the rule.

I think there is mainly a concern that these large and hyped up money-losing IPOs will suddenly take up a large percentage of the index funds forced to buy them due to market cap weighting.

 

[Chuckanut]

I think there is mainly a concern that these large and hyped up money-losing IPOs will suddenly take up a large percentage of the index funds forced to buy them due to market cap weighting.

In any case it sounds like market timing to me.

Right now, Boeing can’t get their manned Starliner to work properly. ULA’s newest rocket has problems burning up its engine nozzles. Blue Origin’s newest rocket just blew up on the pad. SpaceX just landed a 5 year old booster for the 35th time.
Hmmmm…..

 

[jazz4cash]

These reactions make me think that there is a Deranged Musk Syndrome going...

Is that Deranged Musk Syndrome or Musk Derangement Syndrome? Could be either, or both.

 

[RetiredHappy]

Is that Deranged Musk Syndrome or Musk Derangement Syndrome? Could be either, or both.

You are right, Musk Derangement Syndrome.

 

[audreyh1]

Is that Deranged Musk Syndrome or Musk Derangement Syndrome? Could be either, or both.

I think it’s the latter, although one could definitely be concerned about the former!

 

[tulak]

The only concern I’d have is if the IPO companies were suddenly a drag on performance. Since there’s no way to know that, I’m fine with them being in the index. After all, that’s the point of indexing.

 

[RetiredHappy]

The only concern I’d have is if the IPO companies were suddenly a drag on performance. Since there’s no way to know that, I’m fine with them being in the index. After all, that’s the point of indexing.

No difference from other money losing companies being a drag on the index.

 

[tulak]

No difference from other money losing companies being a drag on the index.

Exactly.

 

[Montecfo]

It seems a reasonable concern. But isn't the obvious answer to go with non-cap weighted indices?

I own no Space-x (and no plans in until post-lockup) so no dog in this.

 

[Yipper]

I think it’s the latter, although one could definitely be concerned about the former!

If it were only that simple.

Perhaps you are one of the many that believe in his predictions and timelines, which is completely fine. Now you have an easier way to back that belief up with ownership in his ventures. I'm more skeptical in the ability to live up to the hype regarding much of what he promises coming in the timeframes he talks about.

What he envisions very likely will come to pass. However the kinds of technologies he's talking about will most likely take much longer to realize. And even with a head start his companies are likely to see increased competition, regulatory headwinds and simple economics over the course of the journey to realization.

None of that takes away from the amazing accomplishments his vision and endeavors have achieved thus far. I actually think it makes him a 'single point of risk' should something happen to cause him to not be in the leadership position he is today.

Regardless - some of the posts above doing the math on SPCX exposure in the index funds puts things into better perspective for me and I'll likely just let things ride as is in VTI, etc.

Interesting times and what a show we get to see.

 

[frank05]

SpaceX especially has been advocating to immediately enter the appropriate indexes since they are a “mature” company. According to the current rules there is a seasoning period of about a year before IPO companies can be included on the popular indexes.