SpaceX、OpenAI上市在即，你買的指數基金可能要被迫「高位接盤」

Source: Ben Felix Podcast

Compiled by Felix, PANews

Editor’s Note: Recently, Musk’s SpaceX has confidentially submitted an IPO registration document to the U.S. SEC, targeting a listing as early as June. The company plans to raise $500-750 billion, with a target valuation of approximately $1.75 trillion, potentially making it the largest IPO in history.

However, amid market euphoria, some experts have pointed out that such mega IPOs could be a "disaster" for retail investors, especially those in index funds. Ben Felix, Chief Investment Officer at PWL Capital, recently stated on his podcast that mega IPOs like those of SpaceX and OpenAI are carefully orchestrated "scams," and shared what the upcoming super IPOs mean for retail investors and their portfolios.

PANews has compiled the key takeaways from the podcast. Details are as follows.

If private companies like SpaceX, OpenAI, and Anthropic go public, they would rank among the world's largest corporations. For index fund investors, this means that whether you are bullish on these companies or not, your capital will be forced to buy their stocks.

The original purpose of an index fund is to perfectly replicate the performance of public stock markets. To closely mirror the market, many index construction rules require companies to be added to the index as soon as possible after their IPO. While this is unobjectionable from a macro-representation standpoint, historical data shows that blindly buying IPO stocks often yields poor returns from an investment perspective.

Today, index funds control trillions of dollars. When a newly listed stock is added to a major index, it triggers massive capital inflows into that stock. Because index funds are forced to buy, this provides ample liquidity for sellers and drives up the stock price. This is extremely beneficial for the shareholders of newly listed companies (such as insiders and early investors), but it is not the case for the index fund investors who are forced to become "bag holders."

Companies typically tend to go public when they believe they can fetch a high price. This means that when ordinary investors finally get the chance to buy the stock on the secondary market, it is precisely when company insiders believe the stock is overvalued or at a premium. Investors generally do not want to buy overvalued stocks, but index funds lack this discretion. Regardless of the price, they must buy whatever stocks are included in the index.

Different indices have varying rules for including IPOs. For example, the current S&P 500 index requires a stock to be traded on a public exchange for 12 months before inclusion. In contrast, the S&P Total Market Index allows stocks meeting specific criteria to be included as quickly as 5 days after listing, known as "fast entry."

According to Bloomberg, S&P is considering modifying the rules for the S&P 500 to accelerate the inclusion of mega IPOs like SpaceX. Nasdaq is also contemplating similar adjustments to the Nasdaq 100 index.

A 2025 research paper studied the impact of "fast entry" into the CRSP US Total Market Index (tracked by large ETFs like VTI, with inclusion possible in as few as 5 days) on stock returns. The authors found that IPOs taking the "fast entry" route tend to outperform those that do not by more than 5 percentage points in the period leading up to their inclusion, driven by the anticipated forced buying from index funds. However, this outperformance peaks on the inclusion date and retraces significantly over the following two weeks. Essentially, index funds are being "front-run" by intermediaries like hedge funds, who know that index funds will buy the stock once it becomes eligible for index inclusion. After the price falls back towards its IPO price, the index funds are left holding the stock. The authors describe this as a high "invisible tax" paid by index fund investors, with these intermediaries acting like ticket scalpers for concerts.

Another important concept related to mega IPOs is "free float," which is the proportion of a company's shares available for trading on the public market. Most major indices have minimum free float requirements and determine stock weights based on the free float. Some companies go public by releasing only a tiny fraction of their total market capitalization, known as a "low-float IPO."

According to the Financial Times, SpaceX plans to list with a free float ratio of less than 5%, well below the average. Even with a valuation of $1.75 trillion, with only 5% free float, most indices would assign it a weight based on only $88 billion, or many might exclude it altogether. Nasdaq originally had a minimum free float requirement of 10%, but after a recent public consultation, it approved rule changes not only to accelerate IPO inclusion but also to eliminate the lower limit on free float.

A pessimistic view suggests that Nasdaq changed the rules of the Nasdaq 100 to attract SpaceX to list on its exchange. If SpaceX is included in the Nasdaq index, it would force index funds to buy heavily. This is good news for SpaceX, its early investors, and Nasdaq, but the cost is highly likely to be borne by investors in the Nasdaq 100 index.

Despite differences in index construction, there is no doubt that these mega IPOs will reshape the landscape of public markets. A blog post from S&P Global pointed out that SpaceX, OpenAI, and Anthropic alone could represent 2.9% of the weight in the S&P Global BMI index, almost equivalent to the entire Canadian market. An MSCI index provider estimated in a February 2026 blog post the impact of the top 10 private companies going public (the analysis assumed a SpaceX valuation of only $800 billion, but the overall point remains): with a 5% free float, only 4 companies would be included; with 10% free float, 7 could be included. MSCI found that even with a 25% free float calculation, the forced portfolio adjustments by index funds would result in massive capital flows: the newly listed companies would attract tens of billions of dollars in inflows, while the largest existing listed companies would see tens of billions in outflows. These forced capital flows ultimately impact the interests of index fund investors.

The core fact to understand this phenomenon is: investing in IPOs is one of the worst investment strategies available. While IPOs often surge on their first day of trading, most investors cannot get shares at the offering price. They can only buy after the public market has surged, and the subsequent performance is often dismal.

This underperformance of IPOs even has a specific term: the "new issues puzzle," first proposed in a 1995 paper. That paper found that IPOs between 1970 and 1990 had an average annual return of only 5%, compared to a 12% return for similar-sized, already-public companies during the same period. To achieve the same return over five years, investors would have needed to invest 44% more in the IPO.

A 2019 study by Dimensional Fund Advisors (DFA) analyzed the first-year secondary market performance of over 6,000 IPOs from 1991 to 2018. It found that the IPO portfolio underperformed the broad market and small-cap indices by approximately 2% per year. The only exception was the internet bubble period of 1992-2000, when small-cap tech IPOs soared, followed by the well-known collapse. The study noted that IPO stocks exhibit characteristics similar to "small, high-growth-expectation, low-profit-margin, aggressive-expansion" stocks, often termed "small-cap growth stocks" or "junk growth," which are highly volatile and tend to lag the broader market over the long term.

This is also reflected in IPO-focused ETF products. The Renaissance IPO ETF, which specializes in large U.S. new issues, has underperformed the VTI Total Stock Market ETF by more than 6 percentage points annually since its inception in October 2013. Data compiled by IPO expert Jay Ritter shows that between 1980 and 2023, IPO stocks bought on the secondary market and held for three years underperformed the broader market by an average of 19 percentage points.

Low-float IPOs perform even worse because the limited supply of tradable stock, coupled with concentrated demand, can severely amplify price volatility. This is precisely the listing approach widely expected for OpenAI and SpaceX.

Data shared by Ritter indicates that since 1980, there have been only 11 low-float IPOs (i.e., less than 5% free float) with inflation-adjusted sales of $100 million or more over the past 12 months. Of these, 10 underperformed the market over three years, lagging their offering price by an average of roughly 50% and their first-day closing price by over 60%. This suggests that supply constraints do drive early price surges, but these are often followed by a significant lag relative to the market.

Furthermore, the price-to-sales (P/S) ratios of these IPOs tend to be extremely high at listing. If SpaceX lists with a $1.75 trillion valuation, its P/S ratio would exceed 100x. For comparison, Palantir, the highest P/S stock in the S&P 500 currently, trades at 73x, while the overall average for the S&P index is just 3.1x.

In general, high valuations are associated with lower expected future returns. For index fund investors, the problem is more complex. When large private companies go public at high valuations, they alter the landscape of the broader market. In response, indices must rebalance to maintain their reflection of the overall market.

Market-cap-weighted indices must rebalance to reflect changes in market composition, meaning index funds implicitly engage in "market timing." The problem is that this market timing is often very poor. Companies tend to issue shares when valuations are extremely high and buy back shares when valuations are low. Consequently, index funds, in their effort to track the index, end up being forced to buy high and sell low.

A 2025 paper estimates that this passive timing resulting from index rebalancing creates a drag on portfolio performance of 47 to 70 basis points (0.47% - 0.70%) per year.

Since companies are staying private for longer before going public, should ordinary investors seek opportunities to invest in private companies before their IPOs? Several serious problems exist here:

Survivorship Bias: For every SpaceX or OpenAI you hear about, there are thousands of private companies that failed or stagnated. Survivorship bias in the private market is far more brutal than in the public market.

Extremely High Hidden Fees: The fees and costs associated with private company investments often eat into the returns from holding them. The Wall Street Journal reported that a Special Purpose Vehicle (SPV) designed to buy SpaceX shares charged up to a 4% upfront fee and an additional 25% carry on future profits. There are also risks related to complex structures leading to unclear ownership and outright fraud.

Liquidity Crunch and Abnormal Losses: Unless you are an internal employee, financial intermediaries with access to private stock will not simply hand you a windfall. For example, the ERSShares Private-Public Crossover ETF (XOVR) bought SpaceX shares via an SPV in December 2024. Despite SpaceX's subsequent valuation increase, the ETF faced a series of practical problems because it is a liquid ETF holding a large amount of illiquid assets via the SPV. As a result, the fund not only lost money in absolute terms but also significantly underperformed the broader market.

As Jeff Ptak, a director at Morningstar, noted: "In investing, the more you crave something, the more you should probably question your initial desire to own it." Investors were so eager for a piece of the action that it backfired in this case.

For index fund investors, mega IPOs will inevitably affect market indices and the funds tracking them, especially when these companies are granted "fast entry." Bound by their operational mechanics, index funds will blindly buy these IPO stocks at any price, and their massive buying power can further inflate the cost basis.

If you are an index fund investor, this is a hidden cost you have been paying, or perhaps a part of the cost of index investing that must be accepted. You can choose to endure it and accept it, or you can look for alternative products that do not automatically and blindly buy IPO stocks. Finally, it is nearly impossible for the average person to get these scarce private company shares before an IPO. When everyone is rushing to buy, the exorbitant price or barrier to entry will inevitably eat up most of the returns you might expect.