(Bloomberg) — S&P Dow Jones Indices will keep its existing eligibility requirements for benchmarks including the S&P 500, closing the door to fast entry for big tech IPOs like SpaceX and delaying billions of dollars in flows from passive funds.
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The index provider in a press release Thursday said it will not shorten the 12-month seasoning period for newly public companies it currently has or waive existing profitability and public-float requirements based on a company’s size, diverging from a broader industry shift embraced by rivals Nasdaq Inc. and FTSE Russell.
For new listings like Elon Musk’s SpaceX, the denial means they won’t be greeted by a wall of demand from funds that track the S&P 500. Their fast inclusion in the benchmark would have led to about $14 billion in forced passive buying for SpaceX, more than $8 billion for OpenAI and about $4.6 billion for Anthropic PBC, according to Bloomberg Intelligence estimates.
The decision arrives as Wall Street grapples with a new reality: some companies are reaching unprecedented sizes before they ever enter public markets. The consultation, launched earlier this year, effectively asked whether index rules written for a different era should bend to accommodate companies that now arrive at a scale once reserved for mature blue chips in what has become known as the “fast entry” in industry parlance.
The push for quicker inclusion has raised concerns among some investors who say rules around profitability, float and trading history exist precisely to prevent benchmarks from chasing hype. Furthermore, adding IPOs too quickly, they say, could expose passive funds to greater volatility and force them to buy shares before reliable market pricing is fully established.
Meanwhile, supporters say indexes should include massive companies as quickly as possible to reflect the market investors actually own, adding that these trillion-dollar firms can be economically significant long before they satisfy traditional index requirements.
The outcome means SpaceX, which is preparing what could become the largest IPO in history, would not be eligible for inclusion in the S&P 500 until at least one year after its listing. The company would also need to satisfy the index’s existing requirements for profitability and public float.
“I am genuinely surprised,” said James Seyffart, ETF analyst at Bloomberg Intelligence. “But S&P is the market leader and they can buck the trend.”
Nasdaq changed its rules recently so Space Exploration Technologies Corp., as the company is formally known, can join the Nasdaq 100 Index, a cohort of the largest non-financial companies listed on its exchange, in just 15 trading days, down from a three-month minimum. FTSE Russell adopted a similar approach, shortening the waiting time to five trading days.
The S&P 500 is the most heavily tracked equity benchmark in the world. About $7.5 trillion in passively managed funds follow it and another $3.4 trillion in actively managed assets are benchmarked against it, according to Bloomberg Intelligence data.
More broadly, passive, domestic equity index mutual and exchange-traded funds in the US held roughly $14.4 trillion in assets at the end of April, according to Investment Company Institute data, underscoring the scale of capital that generally cannot buy a stock until it enters a benchmark index. By comparison, active funds amounted to $8.2 trillion.
“We have criticized indices that change their inclusion criteria specifically to include the three high-profile but cash-burning megacaps in their products,” Michael O’Rourke, chief market strategist at JonesTrading Institutional Services, wrote in a note. “The S&P Dow Jones index committee deserves credit for maintaining the standards that made the S&P 500 the U.S. equity market benchmark.”
–With assistance from Sid Verma and Farah Elbahrawy.
(Updates with context on passive investing demand, starting in third paragraph.)
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