Why the SpaceX IPO should be concerning to passive investors tracking the NASDAQ-100 index, and other indexes

SpaceX (which has acquired xAI, which itself has acquired X) is looking to list on the NASDAQ. aiming for a valuation of around $1.75 trillion. However, SpaceX is insisting that NASDAQ changes its rules for inclusion in the NASDAQ-100 index, as a condition for listing. The NASDAQ-100 rule changes would, effectively, allow SpaceX to very quickly get included on the NASDAQ-100, which then forces any index fund tracking the NASDAQ-100 to buy SpaceX stocks based on SpaceX's market capitalisation. So, it will look something like this: (1) SpaceX IPOs and is listed on NASDAQ. (2) SpaceX will likely only float a small percentage of its shares at IPO (say 5%). This takes advantage of a NASDAQ-100 rule change, which says that any stocks with less than 20% float (shares available for public) will be weighted 5x. For example, if SpaceX chooses to float only 5% of its shares, and it manages to present a notional market capitalisation of $1.75 trillion, then it will be weighted as if it had a market capitalisation of $437 billion. (3) Passive funds tracking NASDAQ-100 will then be forced to buy SpaceX shares based on the $437 billion weightage. This will be quick because of another rule change of the NASDAQ-100, which says that a stock will be included on the NASDAQ-100 after only 15 days, if it ranks among the top 40 of the index. (4) SpaceX private shareholders can then unload their shares.