# SpaceX in index funds explained Risks and opportunities of a mega IPO for investors - **Source:** [The Verge (theverge.com)](https://www.theverge.com) - **Published:** 2026-07-20 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/861a5fdd-9a77-43dd-b93b-c62ff900dbda ## How index funds work Index funds are investment vehicles tracking specific market benchmarks like S&P 500 or Nasdaq-100. Popularized by Burton Malkiel's 1973 book 'A Random Walk Down Wall Street', this strategy advocates investing in the entire market rather than picking individual stocks. Endorsed by investors like Warren Buffett, it aims to match market averages over the long term. ## SpaceX joining Nasdaq-100 Prior to SpaceX's IPO, Nasdaq changed its rules allowing large companies to enter Nasdaq-100 on their 15th trading day. Reuters reported this change was made at SpaceX's request. The company's July 7th inclusion automatically forced index funds to purchase its shares, creating immediate demand from passive investment vehicles tracking the index. ## Impact of index rebalancing Harvard Business School research suggests index funds' mandatory purchases influenced SpaceX's IPO performance. Banks and hedge funds executed strategic trades to capitalize on index rebalancing. These mechanisms explain some short-term price fluctuations. The presence of index funds provides underlying support for the stock price despite volatility. ## Lockup expiration consequences As 180-day employee lockup periods expire, new SpaceX shares will enter the market. Bloomberg's Matt Levine notes this could increase the company's index weight after Q2 earnings in mid-August. However, increased supply typically exerts downward pressure on prices, making the net effect uncertain for index-tracking portfolios. ## Concerns over Musk's control CalPERS and New York officials expressed concerns about SpaceX's 'extreme governance structure'. Musk's super-voting rights and limited shareholder litigation options create governance risks. His unpredictable behavior has caused significant valuation swings in other companies. These factors introduce additional risks for index fund investors holding SpaceX. ## Price stability dynamics Wall Street Journal analysis indicates index funds may absorb selling pressure when employee lockups expire in August. Unlike Facebook's 25% post-IPO drop in 2012, SpaceX isn't expected to experience similar crashes. However, short-term speculative trading and lockup releases could still impact prices temporarily before stabilizing. ## Index fund risk profile Malkiel acknowledges overvalued stocks like SpaceX may be risky individually but don't threaten index funds. Diversified index structures limit exposure to any single company's failure. The presence of other tech giants in Nasdaq-100 could counterbalance potential SpaceX underperformance, maintaining overall index stability. ## Upcoming mega IPOs SpaceX is the first of several anticipated mega-IPOs including Anthropic and OpenAI to enter major indexes. Recent rule changes facilitate faster inclusion of innovative tech companies in traditional investment vehicles. This trend provides passive investors with easier access to cutting-edge sectors through diversified exposure. ## Rise of passive investing State Street's Elise Ryan reports passive investments like index funds surpassed active funds in AUM during 2024. This low-cost, long-term strategy continues gaining popularity among retail investors. SpaceX's index inclusion may further accelerate this trend as investors seek broad market exposure without stock-picking risks. ## Long-term perspective SpaceX's index fund impact relates more to market mechanics than fundamentals. Historically, indexes have delivered returns paralleling overall market growth. Including innovative companies like SpaceX improves access to transformative sectors. For investors, maintaining balanced exposure over time remains more crucial than short-term price movements. ## Sources covering this story - https://www.theverge.com/business/968257/spacex-in-your-index-fund-explained — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._