SpaceX IPO: A Incoming Pump and Dump Disaster

SpaceX IPO: A Incoming Pump and Dump Disaster for the Nasdaq100 and S&P 500?

Here's the worst case scenario: Post-IPO, these companies get added to S&P 500/Nasdaq-100 in just 15 days under new and proposed rule changes, with big projected weights (SpaceX ~3.5-4%).

Passive ETFs tracking VOO/QQQM must buy ~$860B+ in shares. Thin public float of just $75 billion creates buying frenzy, spiking prices 1000%+ and inflating valuations leading to even more buying.

Meanwhile, large amounts of every other holding in the indexes must be sold, leading to crashes across the rest of the market.

When lockups end 6 months to a year later and insiders/employees sell, the stocks crash—dragging the indices down ~8% from those weights. It's a forced-buy-then-reversion feedback loop. And a double loss for investors.

The passive ETF forced-buy machine creates the spike, then lockup sales trigger the snap-back. Classic distortion from index inclusion mechanics. Indices could easily lose 8%+ on the unwind alone. Wild times ahead for VOO/QQQM holders. $QQQ $QQQM $SPY $VOO

Listen in as @marcosmilla and I unpack what this could mean for investors on the ETF Academy Show.

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17 Comments

Twenty-five And Invested

@25andinvested · 3mo

I appreciate this but I dont love Milla on blossom his post are very lazy.... as for the pump and dump or one of the biggest ipos of all time..... meh. All the more reason to have more diversified investments on a global scale

Scott S@scottsinvesting · 3moEdited

Glad to see you posting about this John... This is how I expect to see the SpaceX situation play out as well. FWIW... The new and proposed rule changes are beyond horrible IMHO.

Ian S

@ian_s · 3mo

What about float adjusted MCap after the IPO? Wouldn’t that limit how much of a weight it gets in something like the S&P or Nasdaq early on?

Harry @harry9129 · 3mo

Limited Immediate Impact on VOO
While big IPOs generate huge headlines, their immediate impact on a vast, broadly diversified fund like VOO is typically small.
Small Overall Weighting: Even if mega-IPOs raise a collective $280 billion, it would represent only roughly 0.4% of the total US stock market capitalization.
Minimal Drag: A worst-case scenario where new, massive IPOs lose 50% of their value in their first year would only create an estimated 0.2% drag on the total performance of a broad index fund.
Elm Wealth
Elm Wealth

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