IPO Mania: What It Means for Index Funds and Investors

I’m writing this on the morning of Friday, June 12th, while the market waits for the first trades of SpaceX. This IPO is the first of three highly anticipated offerings this year, with Anthropic and OpenAI being the other two. People are both excited and nervous about these huge companies going public and plenty of questions have come in about what it all means. The most common one: What happens when these companies land in index funds? That’s what this article is about.

Anthropic and OpenAI haven’t made their plans public yet, so I’ll use SpaceX as the example.

This is meant to be educational. It is not a recommendation to buy or avoid SpaceX or any other company named here. We do not pick IPOs for client portfolios and nothing below changes that.

Most of you have heard that SpaceX is the biggest IPO ever, valued at around $1.77 trillion, and that several index providers are fast-tracking it into the indexes they run because of its size. That’s all true. The company raised $75 billion in the offering, more than double the previous record set by Saudi Aramco in 2019.

A Quick Reminder on How This Works

An IPO, an initial public offering, is the first time a private company sells shares to the public. Two things happen at once: Early investors and employees finally get to sell some of what they’ve held for years and the company raises new money. After that, the shares trade like any other stock.

Can you buy at the IPO offer price? Usually not. Those shares mostly go to large institutions and select clients before trading opens, and the rest of us buy once it’s trading, at whatever price the market sets. SpaceX is a little different. It set aside an unusually large slice for individual investors, originally about 30% versus the usual 5% to 10%, though heavy demand cut the final retail allocation to the low-20% range. Anecdotally, some retail buyers on X reported being filled for as little as a single share. Either way, a first-day pop mostly rewards whoever got shares at the offer price, not the person buying into the excitement after the open.

Only a Partial Sale

Here’s the detail that matters most for index weighting: None of these companies are selling all of their shares. SpaceX sold $75 billion worth, which is a huge number, but it works out to a little over 4% of the company. The roughly 4% of shares now trading in public hands is called the float. More shares come off lockup over the next year (a lockup is just a promise by insiders not to sell for a set window, usually 180 days), but even after all of those release, only about half the company will ever be publicly owned and tradable. The founder keeps a controlling block of stock that is structured to stay off the market.

Indexes that are market-cap weighted, and the index funds that track them, size each holding by its float-adjusted market cap, not the total value of the company. So even though SpaceX is now one of the most valuable companies in the country, fast-track inclusion likely puts it at around 0.10% to 0.20% of most broad index funds when they first add it. That weight grows gradually as more shares come off lockup and the float increases. The one exception is a Nasdaq-100 fund, which under its rules weights SpaceX on roughly three times its float, so a fund like that will hold a noticeably bigger slice.

One of These Things is Not like the Other

The most prominent equity index in the country, the S&P 500, will not fast-track these companies. A proposal to waive the wait for the largest IPOs was considered and rejected. S&P’s published methodology is blunt about it: There is no fast-track entry for the S&P Composite 1500, which includes the S&P 500. The three mega IPOs of 2026 have to meet the same standard requirements as everyone else, including:

• Trading on a U.S. exchange for at least 12 months
• Positive GAAP net income in the most recent quarter and for the sum of the most recent four quarters combined

The earliest any of the three could qualify for S&P 500 inclusion is a year after going public, but it will probably take longer because four straight quarters of reported profits is a tall order for these particular businesses. So, if your core holding is an S&P 500 fund, it will not be buying SpaceX, Anthropic or OpenAI any time soon.

In other news...one of the largest equity offerings in history was announced just a few weeks ago and it got a fraction of the attention. Alphabet, Google’s parent, is raising about $80 billion in stock to fund its AI buildout. But everyone already knows Alphabet. It isn’t new and shiny like these IPOs.

The plans for Anthropic and OpenAI aren’t public yet, but they could follow the same path as SpaceX: A relatively small initial offering compared to the size of the company, then a series of lockup releases over the following year.

What This Actually Means for You

If you own broad index funds, here’s the short version. Index inclusion is a mechanical, rules-based process. It is not a vote of confidence in the stock and it is not something you need to act on. The fund buys its small, float-sized slice on a schedule and your exposure to SpaceX ends up about the size it should be for someone with your plan: Small, set by the market, bought without drama.

Owning that sliver through a diversified fund inside a broader, multi-asset-class portfolio is a very different thing from buying a brand-new stock at the open because it’s all over the news. The first is your plan doing its job. The second is speculation and it’s worth being honest with yourself about which one you’re doing.

So, while the market waits for SpaceX to start trading this morning, most of you already have the right answer in place and don’t need to do a thing. If you’ve got a financial plan, this wave of IPOs changes nothing in it. If you don't have one, that's the only decision worth making this week.