I keep seeing this comment on all these spacex posts, can someone ELI5 to me why the pension funds are going to be forced to buy this? (do they not have free will on what they buy?)
Index funds track an index mechanically. If you run an S&P 500 fund, you have to mirror the S&P 500. If a company gets added to the index, every fund tracking the index must buy it to match the index -- there is no discretion. Pension funds hold a lot of index funds.
So the causal chain is that pension funds track indexes, indexes have to buy the companies in the index, SpaceX got a fast path to the indexes. SpaceX will launch and pension funds will buy the stock, presumably propping up the stock price.
It would take a lot for pension funds to undo this and would be the opposite of index investing.
There are MAJOR rule changes made to allow them to do this (90 day wait-time reduced to 5 days, financial stability requirements lowered or removed), which is why automated rules like that were created ("oh, if they make it to X, they were already vetted for Y, Z").
A lot of people are throwing a lot of trust and reputation on the bonfire to make this happen.
401ks and pension funds have large amounts of money in index funds.
Major indexes like VTI will buy SpaceX after a waiting period as long as it satisfies other rules (and there have been some rule changes in various indexes to make something with low float like SpaceX eligible for inclusion).
However, most indexes are float-adjusted, meaning that they will adjust the amount of shares of a company in the index based on their float, not their total shares. So, they will initially pick up small amount of weight/shares around the IPO.
The NASDAQ-100 has been bending over backwards to cater to SpaceX, which makes some sense because they want it listed on their exchange. They changed their inclusion rules to include a fast-track for IPOs. This type of mechanism isn't uncommon in other large indexes (VTI has had fast-track rules for a long time) but the timing does make it appear that they changed their rules for SpaceX.
Other providers have made changes to float requirements for inclusion.
The NASDAQ-100 (QQQ being the popular ETF tracking it) is also not float adjusted and, instead, has some capping rules for low-float securities. I haven't done any projections but it seems that NASDAQ-100/QQQ will pickup more shares than the float-adjusted indexes.
Pensions have strong and weird investment rules, and you have no control over what they do other than law. This makes them generally a worse investment (but if you live longer than average they are great anyway) so a 401k is better for most.
in theory, people that do this for a living know this? shouldn't they all be raising the red flags on this, as opposed to say just people on hackernews?
OTOH, the changes may expose them to SpaceX before they could reasonably rebalance their holdings, even if they were to stop buying the affected indexes immediately.