SpaceX sought rapid entry into major stock indexes as part of its IPO, but the S&P 500 refused to bend rules for the unprofitable AI firm. The S&P Dow Jones Indices, which manages the index, decided against waiving financial viability screens or shortening the seasoning period for new IPOs. This means SpaceX will have to wait the standard yearlong period before gaining inclusion in the S&P 500, according to Bloomberg Intelligence. The decision also closed the door for other AI companies like OpenAI and Anthropic to gain similar fast-track access, which could have brought in over $8 billion and $4.6 billion respectively from passive funds. The S&P 500’s stance contrasts with other indices like Nasdaq and FTSE Russell, which allowed faster entry for SpaceX and similar companies. The move comes as Morningstar analysts recently labeled SpaceX as significantly overvalued, estimating its worth at $780 billion, far below its $1.75 trillion IPO goal. The S&P Dow Jones Indices said no changes will be made to the eligibility criteria, including financial viability screens, seasoning period, or minimum IWF.
The denial of accelerated S&P 500 entry for SpaceX comes just days after Morningstar analysts described SpaceX as having been 'significantly overvalued' in the lead-up to its IPO. The investment research firm valued SpaceX at $780 billion—less than half of SpaceX’s $1.75 trillion IPO goal—primarily based on the strengths of SpaceX’s Starlink satellite service and rocket launch business. The S&P 500’s decision to maintain strict eligibility criteria reflects broader concerns about the risks associated with SpaceX’s big bet on AI and speculative orbital data center plans. AI companies are generally facing more challenges in funding and building expensive AI data centers, even as they shift more of the subsidized costs of running AI services onto shocked customers through usage-based pricing.
The S&P Dow Jones Indices held a monthlong consultation to consider changing or waiving several main requirements for so-called MegaCap companies with 'unprecedented market capitalizations.' Those proposed changes included shortening the 'seasoning period' for new IPOs from 12 months to six months, waiving the investable weight factor (IWF) requirement for MegaCap companies to make at least 10 percent of their shares publicly available, and waiving the requirements for MegaCap companies to demonstrate profitability in the latest quarter of the financial year along with the previous four quarters. Such rule changes would have accommodated SpaceX’s plan to only offer approximately 3 percent of its IPO shares to public investors, and the fact that SpaceX is currently unprofitable with a growing debt load that has reached $29 billion because of its spending spree on AI infrastructure.
Source: arstechnica
