SpaceX won’t make the S&P 500

{"text":[[{"start":5.85,"text":"While we were sleeping, S&P Dow Jones Indices came out with their long awaited results to their Consultation on How We Jimmie SpaceX into Our Index Consultation on Treatment of MegaCap Companies."}],[{"start":18.049999999999997,"text":"Following consultations by Nasdaq, FTSE Russell, and Morningstar CRSP — all of whom decided to throw the previous rule book out the window and fast-track inclusion of the megacap telecom value stock — we’d thought this was going to be a formality. We were wrong."}],[{"start":33.099999999999994,"text":"Our emphasis:"}],[{"start":null,"text":"

Based on S&P DJI’s Index Committee review of the markets and after consideration of responses received from a wide range of market participants, no changes will be made to the eligibility criteria including financial viability screens, seasoning period, or minimum IWF, for the S&P 500, S&P MidCap 400, or S&P SmallCap 600 as a result of the S&P Dow Jones Indices consultation on the treatment of MegaCap companies. Accordingly, there will be no changes to existing methodology for this index family.

"}],[{"start":34.449999999999996,"text":"As a reminder, existing S&P DJI seasoning rules require 12 months of trading before being considered for inclusion. The investable weight factor — aka minimum free-float — must be at least 10 per cent of total shares outstanding. And the financial viability screen requires four consecutive quarters of positive net income from continuing operations."}],[{"start":57.199999999999996,"text":"As a result, it looks like SpaceX won’t be sucked up into the largest of the increasingly humungous rules-based index funds for at least a year, but potentially for a lot lot longer."}],[{"start":68.3,"text":"We’ve now got quite a variety of approaches across index providers."}],[{"start":72.8,"text":"MSCI and FTSE Global already had fast-tracking for mega-IPOs using free-float weights after 10 and five trading days respectively. FTSE Russell switched methodology on their Russell indices to bring them into line with the FTSE Global rule book a couple of weeks ago. Morningstar CRSP has amended their existing fast track process by dropping their minimum free-float requirement to admit SpaceX and the rest of the likely floaters. And Nasdaq — they’ve cleared a path for fast-track index inclusion at a three-times weight, but only after 15 days."}],[{"start":107.9,"text":"To make this all easier on the eye and brain, we’ve recoloured our top index chart showing where this leaves money benchmarked and indexed to the largest individual stock indices:"}],[{"start":null,"text":""}],[{"start":120.35000000000001,"text":"All this got us wondering: is passive the new active?"}],[{"start":124.60000000000001,"text":"Further reading:"}],[{"start":126.15,"text":"— Et tu too, FTSE Russell? (FTAV)"}],[{"start":129.15,"text":"— New Nasdaq rules offer SpaceX free liquidity (FTAV)"}],[{"start":133.8,"text":"— Et tu, S&P 500? (FTAV) "}],[{"start":136.55,"text":"— Nasdaq wants to fast-track founders and let index trackers hold the bag (FTAV) "}],[{"start":142.75,"text":"— RIP Wilshire Indexes. And all wannabe index disrupters? (FTAV) "}],[{"start":147.85,"text":"— Morningstar is feeling CRSPy (FTAV)"}],[{"start":151.29999999999998,"text":"The article has been amended to clarify that CRSP’s existing fast track process has been recently amended. And the chart has been amended to clarify that indices classed as having a “New fast track” process include those with existing fast track processes that have been recently amended to reduce the minimum free-float requirements."}],[{"start":178.15,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780707594_9130.mp3"}