SpaceX Is About to Force $800 Billion in Index Funds to Buy Its Stock

Photo by SpaceX on Unsplash

In the coming days, before the opening bell on the stock exchange, SpaceX will officially go public and the circumstances of that one moment are about to echo in nearly all retirement accounts in America. Less than a month after SpaceX sold the biggest IPO in history, on June 12, for $135 per share, raising approximately $75 billion, and including the overallotment, the total is approximately $85.7 billion. Suddenly, less than three weeks later, the company is benefiting from an “extraordinary circumstances” rule the firm had just created which allows a new stock to go public directly to the Nasdaq-100 stock index after 15 days of trading. It has been used for the first time by SpaceX, a company.

Why is Index Inclusion critical? The Nasdaq-100 is more than a scoreboard for tech stocks — it’s the actual blueprint that funds such as the Invesco QQQ Trust have to follow and over $800 billion worth of assets follow it, while trillions are in 401(k) plans and other retirement vehicles that track it indirectly. When a stock is added, those funds just don’t get to vote on whether or not they like the company. They must purchase it by a certain date according to its weightings. Mechanical buying has the potential to send up to $4.3 billion worth of Nasdaq-100 funds to SpaceX shares, according to analysts, while another $3 billion or so may result from Russell index reweighting at the same time. True forced demand is coming into play in a stock with less than a month of public trading.

The notion that this will give a pop, however, should be taken with a grain of salt. History is a good cold shower. In fact, in the 10 trading days following their inclusion, Palantir, Strategy, and Axon all declined in price as they did when they were re-enters the Nasdaq-100 back in 2024. The lesson they have learned is that index fund purchases will tend to be under-priced well before the effective date, with traders buying in before the inclusion of the funds, leaving not much fuel in the tank for a post-inclusion rally. If SpaceX acts as it has in the past, there may be reports of billions of dollars forced purchases on the news tomorrow, and the stock may stay flat or even fall.

The timing is even more mysterious. This all comes on the heels of a real split market: the Dow has just closed at a record high of more than 52,900, while the so-called AI chip makers have been under pressure for two days in a row, as they’ve fallen as much as 5.5% in a day, despite a less-than-hawkish report on jobs activity in June. SpaceX’s launch into the Nasdaq-100 will be caught in the middle of this range between the more broad indices and the more volatile tech and AI group, which is also a richly valued one. Whether or not to ride the SpaceX bandwagon this week is not the real issue for everyday investors. It’s a reminder of how much of the movers and shakers in modern markets has nothing to do with earnings or news, but with the plumbing of passive investing, and the fact that a rule change that most people never heard of can move billions of dollars almost overnight.