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Trends in IPOs and Indexes

July 1, 2026 | Commentary

  • The recent Initial Public Offering (IPO) of SpaceX that valued the company at more than $2 trillion stands in stark contrast to the norm 30 years ago of bringing newer, smaller companies into the public markets. It also raised unprecedented issues about how to best treat these massive IPOs in widely followed stock indexes.
  • In the 1990's IPOs regularly happened for young companies that had not yet proven their business proposition. These newly minted public companies were essentially irrelevant then to major stock index construction. Today that is rare. Ample venture and private equity capital has allowed private companies to wait until they are better established, and in some cases, so large as to create the phenomenon of the Mega IPO.
  • Index providers often claim to construct their products to reflect "the market." The wide variation in the rules providers employ for index inclusion makes a mockery of those assertions. The disparate treatment of Mega IPO's highlights the need for investors to look through the indexes to confirm that the so-called passive investments they make are constructed and sized in a way consistent with their return and risk goals.

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