Managing Editor’s Note: Earlier this year, our colleague Jeff Brown released a video that went viral… explaining how the SpaceX IPO was part of Elon Musk’s plan to dominate the AI industry. Now that Elon has confirmed the IPO date, he’s about to unlock another explosive opportunity.
But Jeff’s not talking about buying shares of SpaceX on IPO day. Instead, he’s going to reveal the real opportunity on Wednesday, June 3, at 8 p.m. ET.
He will be reporting directly from SpaceX’s headquarters to show you what he believes is the single best way to cash in on this historic IPO. Click here to save your seat.
The most anticipated debut in history is just a couple of weeks away.
That’s when Elon Musk’s SpaceX is set to go public in a record-setting initial public offering (IPO). An IPO is when a private company offers shares to the general public for the first time.
And SpaceX looks to smash several records along the way. It’s aiming to go public at a valuation of up to $2 trillion, making it the most valuable IPO in history.
The company also plans to raise $80 billion in doing so – nearly three times the prior record.
Investors are clamoring to get their hands on shares, and index managers behind the S&P 500 and Nasdaq don’t want to miss out.
So let’s look at why SpaceX is going to shake up the indexes… and why that could trigger a massive rush to the exits from the market’s biggest stocks…
Investors are plowing money into passive investment vehicles tracking indexes like the S&P 500 and Nasdaq. Assets in passive investment funds that mimic an index stand at $19 trillion.
Index trackers like the State Street SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust, Series 1 (QQQ) are weighted by market capitalization, which makes it easy to tap into the stock market’s biggest names.
That includes companies like Nvidia (NVDA), Microsoft (MSFT), and Google-parent Alphabet (GOOG). The top 10 stocks by weight in the S&P 500 make up nearly 40% of the index.
But the SpaceX IPO could make it emerge as one of the largest publicly traded companies in the world. If SpaceX receives a valuation at the top end of the range (around $2 trillion), that would rank SpaceX as the sixth-largest company in the S&P 500.
But there’s just one problem.
Index managers have historically operated under strict rules for inclusion in their benchmarks. For example, S&P requires a 12-month period of “seasoning” before being added to an index. There are other rules around things like profitability.
But SpaceX is pushing index managers to rewrite the rules. SpaceX is one of the most sought-after IPOs ever seen, and not adding SpaceX to index holdings could drive away investor assets.
If the indexes do add it right away, SpaceX would become a major player in creating returns in the stock market.
That’s why index providers are rushing to rewrite the rules to add SpaceX right after its IPO. But in doing so, they could trigger a massive wave in selling across the market’s top stocks…
Given the size of the SpaceX IPO and investor demand for exposure, index providers are looking to overhaul their inclusion rules in order to add SpaceX more quickly to indexes.
In fact, the S&P Dow Jones Indices (the company behind the S&P 500) is looking to loosen rules for adding mega-cap IPOs into its indexes, including shortening the time required for a company to be public and waiving corporate profitability requirements.
The Nasdaq is loosening rules for inclusion in its popular QQQ ETF in order to help win the SpaceX listing over rival NYSE. SpaceX could be added to QQQ just 15 days after going public.
Either way, SpaceX’s inclusion in the stock market will have a big ripple effect that many aren’t yet contemplating…
When passive indexes add SpaceX, trillions of dollars in investment vehicles tracking those indexes will also be on the move. Vitally, other positions within the indexes will have to be sold to make room for the huge newcomer.
That means we’re about to see massive outflows from some of the biggest AI bull market winners, including the Magnificent 7.
Depending on SpaceX’s valuation and how many shares are ultimately available, one estimate from JPMorgan predicts that there could be outflows of over $20 billion just from Nvidia. Apple could see over $15 billion of selling, while Microsoft and Amazon are projected to top $10 billion in outflows.
The SpaceX IPO is set to be a blockbuster event. But for the market’s biggest stocks, it could become a catalyst for forced selling.
That’s one reason to play your hand carefully as this IPO rolls out. You don’t want to be caught off guard if volatility suddenly spikes – or left holding the bag.
If you want to learn more about my strategy for profiting from the SpaceX IPO without buying shares, check out my recent briefing here…
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
