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Comment by mattmaroon | Hacker News Reader

Everybody is upset about the rule change, but to be honest, they would’ve just ended up in the same position a few months later. Elon has kept Tesla’s market cap at 5-10x what any reasonable investor would think it should be for the better part of a decade. It’s not like SpaceX is going to tank in the next 3 months and they’ll be left holding the bag. It’s not like it wasn’t going to end up in every index in a year.

And to be clear, I’m not saying it’s a good thing. I just don’t think it matters so much.

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Moving to have 401ks investing in it when 5% of the stock is publicly available versus 30-40%+ that would have been available on the previous timelines seems like it could have pretty dramatic effects on its price.

The relevant indices (S&P500, Vanguard) buy in proportion to available float -- i.e., its market cap is weighted by 5%. Only Nasdaq 100 ignores float, stupidly, but almost no money, especially 401(k) money, is in that.

This may be true (I'm sure it is, but I haven't verified) but the large majority of people do not know this, which is why hearing "my retirement account is going to be forced to by a bunch of spacex at a $2.5T valuation" makes them.... uneasy.

Oh there are ETFs that track Nasdaq 100.

There are ETFs that track pretty much everything you can imagine. How much retirement money is in those?

I believe I already addressed this in my earlier remarks ("almost no money, especially 401(k) money, is in [Nasdaq 100 tracking funds]").

Musk tried mightily to get S&P to change their 12 month rule to 15 days but they refused. Nasdaq, however, caved to Musk and agreed to change the rules of its Index - from a 12 months wait to 15 days - in exchange for Musk agreeing to list SpaceX on Nasdaq's exchange.

There are ETFs that were issued tied to the Nasdaq 100 which are therefore legally bound to buy SpaceX. But the biggest immorality is the SEC allowing Musk's attempt to manipulate the market by: 1. Setting an IPO price for SpaceX (which absorbed xAi and its money guzzling losses) at unsustainable, incredibly inflated prices; and then 2. Putting incredible pressure on SP500 and other index makers to change their rules to force the purchase of SpaceX at those sky high prices (in an IPO, company gets to set the IPO price).

It's legal. At least in the eyes of the SEC which, of course, is an institution that is controlled by the wealthiest who control the markets, so of course it's legal.

But it is outrageous market manipulation that is fraudulent in its intent to enrich the wealthiest man on earth at the expense of ever wage earner putting her money into Index Funds.

Thank goodness the S&P and CRSP refused to change their rules. Otherwise the shifting of risk from Musk onto the shoulders of every working American would have been complete.

I don't understand your comment. The SEC doesn't control IPO prices. No one was forced to buy $SPCX at the IPO price.

If Musk's pressure had succeeded and the S&P and CRSP had changed their index rules, then the major indexes would have been legally obligated to buy SpaceX at the IPO price - or presumably higher because their own mass purchases would have driven the price even higher.

That was Musk's plan. It failed because he couldn't get the major indexes to cow tail to his pressure and demands.

Edit: My reference to the SEC is that they are charged with investigating market manipulation. And Musk was involved in the biggest attempt at market manipulation probably in history - trying to pressure private indexes used by almost every ETF in the world (S&P and CRSP) to change their rules which would have legally obligated those ETFs to purchase SpaceX within 15 days.

However, the SEC cannot investigate it because no laws would be violated despite the fact it would have been an incredible market manipulation.

In fact, the change in rules by Nasdaq 100 is a huge market manipulation that has taken place exactly as I describe - it's simply not as catastrophically large as it would have been had all the major indexes succumbed to Musk's demands.

You seem to be confused about how index funds work. Hypothetically even if $SPCX was added to the S&P500, funds that track that index wouldn't be legally required to purchase it at the IPO price. Have you ever even read a fund prospectus or do you believe the uninformed nonsense you read online? The way it actually works is that when a stock is added to an index the index funds gradually build a position using a series of trades over time.

Mutual funds and ETFs set forth a prospectus that is a legal document binding them by law to comply with how they operate. While an etf is free to create its own index, that is not the way the market works. Vanguard, Fidelity, iShares, BlackRock and the other major players, state in their prospectus what index the ETF will follow - such as the CRSP US Total Market Index to use one example from Vanguard's VTI etf.

That means Vanguard VTI tracks the stocks that are contained in the CRSP US Total Market Index. So, if CRSP adds a new holding to its US Total Market Index, Vanguard VTI is legally bound by its prospectus to add that stock to VTI and to do so in a manner that assures VTI returns track the CRSP US Total Market Index returns as closely as possible (meaning they own every stock CRSP does and in the same proportion that CRSP does).

This is not just a 'good idea'. It is legally binding upon Vanguard by virtue of the VTI prospectus.

The way you don’t actually address the points people make or even seem to understand them, but rather just keep restating what was already said, makes you a pretty good proxy for the exact view I was talking about, so thanks!

It's always disappointing to see that level of aggressive ignorance on HN. You completely missed the point. The fund is legally bound to make a good faith effort to track a target index, not to immediately buy every stock the day it's added to the index.

It would be helpful if you could provide a source supporting your thought that an ETF following a particular index would buy stock in the new company over what you describe as an extended period of time - as opposed to within a short few days.

I spent quite a lot of time before the SpaceX IPO learning how a change in Nasdaq 100 rules regarding adding a new company to its index, would impact ETFs whose prospectus tied them to the Nasdaq 100. The information I reviewed indicated the ETFs would add all of the new purchases immediately (within a matter of days following the addition of a new company to the tracking index).

>aggressive ignorance on HN

That's rich in view of the fact you are the one who is expressing aggressive ignorance. The truth is:

1. An ETF tracking a specific passive index is legally obligated to purchase the shares of a new company added to that index with zero discretion allowed no matter how irrational the pricing might be.

2. Contrary to what you've been spewing about ETFs adding the stock gradually over time, the truth is all ETFs make their full purchases BEFORE the company is actually even added.

Doubt it? Do a quick google search: How soon do ETF's tracking a specific index buy the stock in a new company added to the index they track?

So stop being a jerk with your personal attacks - especially when you don't know what you are talking about.

2. You’re misreading that. They do it before the rebalance date, not before it is added to the index. Rebalances only happen every 3-6 months generally, so they definitely are buying it over a period of time, not all at once, specifically so they don’t move markets.

The aggressive ignorance (not my term, I’ve got a better one) is that multiple times this guy just didn’t even respond to the actual point. See his first response to me where he just restated the thing I was clearly replying to, rather than addressing my actual argument, which is that all those people would’ve ended up with the same amount of SpaceX shars at the same time, even if the rules had not changed. He just restated the argument I had already just rebutted, then he did the same thing in this branch.

It does not matter that SpaceX is in the index sooner. The future in six months or 12 months would look the same in either case.

> CRSP had changed their index rules

CRSP did change their rule earlier in Feb, where they added a clause that later allowed SPCX to be included, despite having <10% float.

Source: https://www.crsp.org/crsp-market-indexes-changes-to-float-sh...

> cow tail to his pressure and demands.

The idea you wanted is "kowtow" not "cow tail". The "kowtow" is a Chinese gesture of submission to power, in practice it might be a large formal gesture like European bowing, but it can be something much more subtle, like the knuckle tap in the tea ceremony, the observer knows what is signified. The submission to power rather than a particular gesture is what's retained in English.

"Cow tail" does exist as an actual idea in baseball, as a particular type of long swing which is said to resemble how cows twitch their tails but here that doesn't make sense.

Without rapid purchasing by indexes SpaceX’s stock would likely to tank as ever more people would be able to sell over the first year.

It’s a 24 year old company with a current high flying stock price based on very questionable numbers.

We all said that about Tesla for years, and a lot of people got burned on the trade. This time may be different, but it also may not be.

Tesla’s numbers looked vastly more reasonable.

“In 2025, SpaceX generated $18.7 billion in revenue, with its Starlink satellite internet service accounting for $11.39 billion, or 61% of total sales.”

Tesla had higher revenue number in at the start of 2019, when it had a market cap of ~0.06 trillion. Further Tesla was highly volatile in 2021 despite huge earnings growth with some people bank when it fell from 1.2T to 0.34T before recovering.

Yes, Tesla was ridiculous at the time, but Tesla’s valuation at the time is normal for tech companies these days. However, the main comparison, which Elon has been trying desperately to escape, is traditional automakers. If you compare how out-of-line Tesla’s PE and PS ratios are against Toyota and other car makers, it’s about the same ratio as SpaceX to tech companies today.

Tesla’s P/E ratio is currently 365. They have less than 1% market share, and declining, weak profits, products that seem to be suffering from weak updates and brand harm due to Elon’s politics, and competitors outpacing them from all sides.

Toyota’s P/E is under ten. They’ll make more money selling cars this quarter than TSLA will in ten years.

TSLA prices have never been within an order of magnitude of reasonable. They’ve been publicly traded for so long that some of the people legally driving them weren’t born when they IPOed. They’re not a startup and haven’t been in a while.

I agree Tesla’s stock is horribly overvalued, it’s the poster child for the market can remain irrational longer than you can remain solvent.

My point is as a benchmark it still makes SpaceX look like a bad investment.

Right and my point is that whether or not it’s a bad investment makes absolutely no difference to the people who own the shares because the price is divorced from that. SpaceX shares only have to stay irrational for six months for this rule change to have had no effect.

Ok that seems like a reasonable argument, but it’s got a glaring hole.

The reason for these rules is lockup periods. There’s presumably many people really want to sell significant SpaceX stock at the current price who can’t yet. Effectively August 2026 is going to add more stock to the market and that’s going to continue for a while.

Such post IPO volatility is the justification for indexes to wait, and honestly it’s a very good argument IMO.

I also remember lots of people saying Uber wasn’t a $100B company.

With several large bets on the table with starship that have yet to play out.

Remember mars by 2024? I think that was around the time they started accepting deposits on tesla semi.

They shipped the Semi though. Yes the situation is bad but its not vaporware. Musk had to scam the markets to survive in late 2017/2018

The problem is the stock is not valued based on the space part. It's sky-high valuation is based on absurd projected AI revenues.

We’ll have to agree to disagree on this one; anytime someone has to scam the markets to survive it’s my opinion they deserve jail and ruination, not a harem.

Depends, they've gone to pains to ensure the indexes will buy as share lockups end. It's dodgy no matter how you look at.

The one saving grace is s&p isnt changing anything, and they were by far the biggest index.

The whole IPO was designed to be like a short squeeze where index funds have to buy soon but there's not enough shares. For the little float that's available they are weighting it significantly more than they should by previous rules. They need to have tens of billions worth of what was 70 billion by next week, and retail investors who got in on the IPO were told by their brokers if they sell early on they will not get to participate in future IPOs.

There were not enough shares actually trading for the index funds to fulfill their requirements that's why the price keeps going up

Bubbles always blow. Maybe not in 3 months but eventually someone will figure that those trillions can't possibly be made back ever again.

And then the fall down is hard.

They probably won't be on the S&P for years, because of profitability requirements.

If they can keep google and anthropic deals, they're already profitable.

That's huge IF, both of them have 90 day exit clause, and it's not like it's a long-term business.

Those deals are doable because xAI failed and SpaceX has a bunch of spare compute lying around they can rent out. However, SpaceX doesn't make the hardware or software so moat is nonexistent.

If compute capacity increases or AI demand decreases, Google/Anthropic will likely skip SpaceX and just buy their own hardware in their own datacenters or go back to their own datacenters.

I think anthropic needs that compute. They'll probably rent it as long as they can. They aren't really in the datacenter business. Google yes, I think they'll stop at some point.

There is no way that Elon Musk wants to be leasing out compute. He'd rather be using that compute to power Grok.

I got a good investment vehicle for you. How would you like to purchase shares in the Brooklyn bridge? You could see returns in the form of tolls.

Plus if AI is indeed a bubble, investors are already up to the neck in it. Think of all the key stocks of the S&P and Nasdaq that are lifted by AI: nvidia, microsoft, amazon, oracle, micron, intel, amd, etc. And add their lenders and the whole datacenter supply chain.

China enters the chat https://spacenews.com/china-conducts-4-launches-in-3-days-bu...

> It’s not like SpaceX is going to tank in the next 3 months and they’ll be left holding the bag.

A stock's value can disappear in a matter of days to a degree it leads to a complete collapse. It has happened before, see Enron or Wirecard.

> It’s not like it wasn’t going to end up in every index in a year.

Sure, but it's still not wise to let unripe stocks into most American and RoW retirement funds. There's a reason why many complex software projects keep some sort of "staging" tree, and the stock markets should do so as well.

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