Index funds avoid billions in forced SpaceX buying after the decision
S&P Dow Jones Indices kept its profitability rule for megacap IPOs on Thursday and declined to relax entry standards, according to Reuters.
The decision spared passive S&P 500 funds, which hold trillions in client assets, from buying into an unprofitable company.
Companies must still post positive net income over the past year, including the most recent quarter, Bloomberg reports, following a month-long consultation.
According to Reuters, that decision rules out a quick path into the benchmark for SpaceX, which is raising US$75bn and targeting a valuation near US$1.75tn ahead of its June 12 debut.
SpaceX fails three of the index's tests.
To join the S&P 500, a company must trade publicly for at least 12 months, earn a profit under US accounting standards and hold a free float of at least 10 percent.
The company posted a net loss of US$4.94bn in 2025 even as revenue rose 33 percent to US$18.67bn, has never been profitable, and carries an implied float of just 3-4 percent.
Evercore ISI analysts do not expect positive annual net income until 2027, Bloomberg reported, which could push any entry to 2028 if the rule stands.
The forced buying at stake was sizeable.
JPMorgan estimated that inclusion would have drawn about US$10bn in passive inflows for SpaceX at a US$2tn market cap and a 5 percent float, according to Reuters.
Bloomberg Intelligence put the combined forced buying higher: roughly US$14bn for SpaceX, more than US$8bn for OpenAI and close to US$9bn for Anthropic.
Jay Woods, chief strategist at Freedom Capital Markets, said the change would force exposure onto investors who never chose it.
Anyone holding an S&P 500 ETF in their 401(k) would become an "involuntary SpaceX shareholder," he told Reuters, whether or not they trusted the business or accepted the risk. "The index wasn't designed to do that."
Clients will still gain exposure elsewhere.
Nasdaq has cut its waiting period to 15 trading days from a three-month minimum, and FTSE Russell now allows entry in five, Bloomberg reported.
SpaceX could join the Nasdaq 100 as soon as the end of this month, and a Nasdaq listing places it in the tech-heavy Nasdaq Composite automatically, which could widen performance gaps between Nasdaq trackers and the S&P 500, according to Reuters.
Several market watchers backed the decision.
Art Hogan, chief market strategist at B. Riley Wealth, praised the index as "rules-based," as reported by the same outlet.
Insisting on profitability before entry, he said, speaks well of its credibility.
Michael Antonelli, market strategist at Baird, told Bloomberg the move would not dent the benchmark's standing.
The profitability test is "hard coded into their product," he said, and not something the committee would drop for Elon Musk and SpaceX.
The hurdle extends beyond SpaceX.
Anthropic and OpenAI are weighing IPOs as soon as this year and could face the same test despite expected valuations above US$1tn each, Bloomberg reported.
Anthropic's operating profit for the June quarter is expected to reach US$559m, though it does not necessarily expect to stay profitable as spending rises, while OpenAI is not expected to be profitable in the coming years.
For now, the benchmark's dominance looks secure.
More than US$20tn in assets track the S&P 500, compared with US$1.4tn for the Nasdaq 100, according to Reuters.
Peter Andersen, founder of Andersen Capital Management, told the outlet that one absent stock would not move institutions off the benchmark.
SpaceX's omission, he said, is "just not a strong enough incentive" to make them change their benchmarks.
