S&P Dow Jones Maintains Large IPO Index Inclusion Rules... SpaceX Can't Enter Immediately

S&P Dow Jones Indices has decided to maintain its current requirements for inclusion in the S&P 500 index. As a result, it will remain difficult for ultra-large companies like SpaceX to be included in the index immediately after going public.

Reuters Yonhap News

According to Bloomberg on June 5 (local time), S&P Dow Jones Indices announced in a press release that it will not shorten the current 12-month waiting period applied to newly listed companies. In addition, it will not exempt companies from existing profitability and public float requirements solely because of their large size.

This decision follows a public consultation earlier this year on whether to allow early inclusion of ultra-large initial public offering (IPO) companies in the S&P 500 index, a practice referred to in the industry as "fast entry." Accordingly, SpaceX, which is preparing for what could be the largest IPO ever, will be excluded from S&P 500 inclusion for at least one year after its listing. Even after that, it must meet the existing inclusion requirements.

James Seyffart, an ETF analyst at Bloomberg Intelligence, commented, "Honestly, I was surprised," but added, "S&P is a market leader and can go against the tide."

Bloomberg pointed out that this decision contrasts with recent moves by Nasdaq and FTSE Russell, both of which have eased regulations to allow early inclusion of ultra-large IPOs. Nasdaq recently revised its rules to allow SpaceX to be added to the Nasdaq 100 index just 15 trading days after its listing; the previous minimum waiting period was three months. FTSE Russell has also adopted a similar approach, shortening its waiting period to five trading days.

Meanwhile, there is concern about index providers moving to allow early inclusion of IPO companies. Critics argue that if IPO companies are included in indices too quickly, passive funds may be exposed to greater volatility and may have to buy shares before reliable market prices are established. On the other hand, proponents say that indices should include large companies as quickly as possible in order to better reflect the actual market holdings of investors.

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