>>If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.
"People" don't know much about finance to put it mildly.
ETFs are created by market demand. Even "factors" ETFs are often based on completely irrational things like dividends, P/E ratios and other meaningless metrics. This happens because people are easily seduced by narratives ("solid dividend paying stocks", "low P/E ratio - good returns") which are plainly wrong but tempting to an average person.
Most people realized they don't know anything about finance and would like to pay someone (their fund manager) to make responsible decisions and expose them to wide market while avoiding blatant manipulations. Unfortunately the incentives are misaligned here. The managers' incentives are somewhere else. They are not paid by long term performance of their fund and they are disproportionally penalized for taking contrarian decisions.
People being force feed those mega IPOs losing money on them is bad for others as well - there will be less wealth for productive investments and more in hands of "players" (or scammers if you want to call it out). There might be a crash. Trust in financial market will plummet and hostile regulation might arise which other market participants will pay for even though they are not to blame.
I will not have exposure to those mega IPOs but I am in privileged position because:
-My understanding of financial markets is much better than that of an average person.
-I have quite a bit of time to follow all of it and react in time
-I pay 0% capital gain tax and use a broker with nearly 0 fees which allows me to rotate for free (almost)
-I know where and how to move my money so I don't lose advantages of wide market exposure
It took me a lot of effort to set it all up like that. An average person falls short on all of the above and is not in position to avoid donating part of their pension fund to Musk and Altman though. It is still bad for me for reasons mentioned above.