⏳ Reading Time: 3 minutesWith the SpaceX Initial Public Offering (IPO) due to price on June 12th, and Anthropic and OpenAI waiting in the wings, we wanted to dig into the implications for our portfolios.
First, it’s worth highlighting that we invest predominantly in ETFs. Those ETFs track indices, whose composition adjusts over time as companies enter or exit financial markets. As a result, we’ve seen a good amount of attention focused on the way that these index providers account for newly listed companies.
Different index providers have followed different approaches. For instance, Standard & Poor’s 500 (the stock market index tracking the performance of 500 leading companies in the United States) has historically had a stricter approach than the Nasdaq, calling for 12 months of history as a listed company and four consecutive quarters of profitability before they could be included. The Nasdaq has generally allowed companies to enter its indices much sooner.
At the same time, S&P is also on the verge of softening its approach. On June 8th, it is likely to determine that a company can be included in the S&P 500 only six months after listing, regardless of whether it has shown accounting profits. SpaceX, as a reminder, is looking to sell at a valuation of around 100x forward revenue. That’s a very high multiple on its current, loss-making business, whatever you think of its prospects in the future – something we highlighted a couple of weeks ago (along with many others).
