Pod Insights Masters in Business At The Money: Is SpaceX IPO Breaking Capitalism? About this episode Once upon a time, companies went public to raise money. Road shows, pitch decks, investor meetings -- and eventually, you’d float some stock and IPO. That’s not the case anymore.
Dave Nadig is President and Director of Research at ETF.com, and he shares with us how investors should navigate all of these new products.
Each week, “At the Money” discusses an important topic in money management. From portfolio construction to taxes and cutting down on fees, join Barry Ritholtz to learn the best ways to put your money to work.
See omnystudio.com/listener https://omnystudio.com/listener for privacy information.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity and credit is helping to build the backbone of the global economy. We combine deep operational expertise with disciplined long-term investing, uncovering value and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.
0:34 Speaker 01 This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting
1:16 Speaker 01 and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.
1:57 Speaker 02 Wise is the smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. It's simple and free to sign up when you download the Wise app. Be smart, get wise. Ts and Cs apply.
2:29 Speaker 01 Bloomberg Audio Studios, podcasts, radio, news.
3:00 Barry Ritholtz? Once upon a time, companies went public to raise money. You'd go on a roadshow to pitch your story and drum up interest. You'd float a big pile of stock and then you're off to the races to go build your company. Turns out, that's not really the case anymore. I'm Barry Ritholtz and on today's episode of At the Money, we're going to talk about the upcoming IPOs for trillion dollar companies like SpaceX, Anthropic, and OpenAI. To help us unpack all of this and what it means for your portfolio, let's bring in Dave Noddick.
3:39 Barry Ritholtz? He is President and Director of Research at ETF.com and he shares with us how investors should be navigating not only these IPOs, but what they're going to mean for various indexes like the NASDAQ 100 and the S&P 500. So, Dave, you wrote a fascinating piece and essentially you claimed SpaceX is breaking capitalism and indexing. What is exactly broken? Is it the IPO process, the index process, or both?
4:14 Speaker 04 I gotta say, I think it's both. Sadly, I think it's both. The IPO process, I think most people can understand, seems pretty broken, right? We now live in a world where the private equity space is where most of the growth in capitalism is captured, right? If I had a great idea, Barry, if you and I were going to just launch a company tomorrow, go raise a bunch of money and do something. We wouldn't go to Wall Street. We would go to some private equity firm and we would say, hey, we've got this great idea. And they would say, awesome, give us 75% of your company for a couple million bucks and we'd be off to the races. And then when we need more money, we would go back to that same private equity person who would probably
4:58 Speaker 04 connect us to their favorite private credit person, who would then loan us another $50 million for us to do the next stage of our business and so on, until we had accumulated so many shareholders, so many, so many mouths to feed, that if eventually we have to go public so that all those people can get paid. That is the reality of the modern IPO market, which works out pretty well for the private equity capital, but no longer really rewards the public as a public market, the way it used to.
5:31 Barry Ritholtz? So, so let's talk about that contrast between old IPOs that raised growth capital. You very much imply in your piece SpaceX is breaking capitalism and indexing, which by the way, I stole that opening paragraph of. You very much imply that modern IPOs essentially exist to provide insiders and early investors with with liquidity. So first, when did this shift occur? And second, is it an issue? Is it a structural problem?
6:06 Speaker 04 I think we can trace this back to pretty much every IPO since the great financial crisis. I mean, I think any any IPO in the last 15 or 20 years has followed a pretty similar pattern. We've seen this, the steady growth of the size of IPOs, they're bigger and bigger and bigger companies. Now we're talking about trillion dollar IPOs. You know, when I went in the dot com era, the average IPO was about $120 million. That was the value of the company post IPO and the amount being floated averaged around 30 or 40%. So big chunks of these companies went public, people could assess them, they traded for a significant period of time, sometimes profitable, sometimes not profitable.
6:50 Speaker 04 And then they would end up in the hands of the public and indexes. And that was a that was a lengthy process. It took, you know, a year or two of being a public company for people to get familiar with you. That's all that's all gone now. And so now what we have are these sort of headline making IPOs of big companies, whether they're, you know, a Klarna or a Reddit or now a SpaceX. And so everybody now feels like these are lottery tickets that you want to get in super early on the IPO, get some purported pop, which no longer really happens. And that that is your key to riches. Increasingly, what actually happens is the opposite. Companies come public, they trade down initially. Sometimes they
7:32 Speaker 04 ramp up Tesla famously had a great first year after the initial sell off. So it's not that all IPOs go this way, but it is no longer like the dot com era.
7:42 Barry Ritholtz? So you mentioned SpaceX. People have described this company as kind of unique, in part because it involves commercializing space, in part because Elon Musk still, despite the past couple of years, has a cult following, courtesy of his work at Tesla. And then also because it's just an immense valuation. What makes SpaceX unique? Or is it not unique?
8:11 Speaker 04 Well, I don't I don't want this to be about whether SpaceX good or SpaceX bad. SpaceX is unique for a bunch of structural reasons. It is already a multi-business conglomerate. It's pretty rare. We see a multi-business conglomerate come out as an IPO. That tends to be what you do after you IPO and start accumulating new companies. So inside the SpaceX wrapper, we've got Twitter X, we've got Grok and XAI, which is increasingly now a data center story, I guess, unless a development of AI story. We've got the providing commercial internet, right? Nine million Starlink subscribers. That's a very real business that makes real money. And then the near monopoly monopoly on at least United States space launch is
8:55 Speaker 04 virtually completely a monopoly now for SpaceX. So That's a great business or not, that makes it a bit unique already out of the gate. But more unique is how it's coming to market. It's only floating 5% of its stock. So 95% of this company will still be privately held after they float the IPO. And yet, despite that very, very thin float, it's getting accelerated entry into the NASDAQ 100 and is being considered for accelerated entry into the S and P 500. So we're breaking all sorts of rules.
9:27 Barry Ritholtz? So, so let's talk about the NASDAQ 100. If you've been an investor in the Qs, as they're known, the NASDAQ 100 index ETF, you have done tremendously well over the past 15 years, outperformed the S and P, outperformed just about every historical period, including the 90s where the Qs were just, you know, a giant home run, except for that little, you know, 83% crash at the end. So, so what, what did NASDAQ do wrong in admitting SpaceX to the, the Qs? And, and what should they have done instead?
10:07 Speaker 04 Well, so what they did was over the spring, they did what's called the consultation, which is they go to all the people who actually pay for the index. I mean, important to point out NASDAQ's in a business. They licensed the NASDAQ 100 to folks like Invesco to run the Qs products that people know. And so they went out to all the people who licensed that index and said, would you be okay if we did this thing? And everybody said yes. And so now we have new rules. What the new rules did was accelerate how quickly a company can get in if they're very large to 15 days. It used to be six months and they've also changed how they think about the float. It used to be if you really floated a very thin amount of stock, they just wouldn't consider you at all.
10:51 Speaker 04 Now at 5% float, they're going to pretend that your float is 15% or 3X.
10:58 Speaker 04 Just because of reasons. And, and then over time, as the float increases, as shares come off lockup and more shares trade, that will ramp until 33% of the fund, the company is floated, at which point it receives full weight in the index. Because the NASDAQ 100, unlike most other indexes, is not free float adjusted. So normally, if they didn't do anything, and they let SpaceX in, it would come in at 1.75 trillion. Instead, it's going to come up at 15% of that when it finally launches. And then that will increase with every unlock, the percentage that the funds need will go up. And so it creates this kind of ramp that as more shares come out, there's more guaranteed buying, which I gotta say,
11:42 Speaker 04 feels like bad liquidity for the insiders.
11:45 Barry Ritholtz? What motivates them to do this? I mean, what harm would befall the index, or the IPO, or NASDAQ generally, if they waited the six months that they're supposed to wait for every other IPO?
12:02 Speaker 04 I mean, basically, none. The only argument you can make is that by having SpaceX in the ETFs, in the index itself, that people will be more attracted to that index, and therefore, people will put more money in those funds. And ultimately, that's what people really care about. They want money tracking those funds. From a performance perspective, it's not like every human being on the planet won't be able to buy these shares the day after an IPO. There'll be, if you want to go buy 100 shares, the day after the IPO, there'll be-
12:33 Barry Ritholtz? Well, the day of the IPO, you don't even have to wait till the-
12:35 Speaker 04 Right. There'll be a price. Anybody will be able to buy it. So it's not like it is this rarified thing that can only be bought through this index. It's going to be everywhere. It's going to be like Apple stock. It'll be easily tradable all over the world. So all this is doing is guaranteeing that existing money that is tracking that index will have to sell a whole bunch of other things in order to buy this new slug of SpaceX, which will be something like $7-ish billion on that one day that they have to buy it all. So they're just going to be a big whale buyer in the market on one day. Guess which way the price will go. Honestly, who knows? Because who's, everybody knows this. So it's going
13:16 Speaker 04 to get front run. So do you buy it the day before this? Do you wait until after this? It's going to be one of those get the popcorn moments in markets.
13:24 Barry Ritholtz? Is this an attempt to- Get ownership of SpaceX in an index before the S and P 500?
13:33 Speaker 04 Sure. It's a chance to build a pool of assets with a reasonable weight before the rest of the index world has piled on. Although, we should point out, S and P is now considering accelerating their rules too, to include a company like SpaceX after six months. Not nearly as egregious, and the S and P has a committee that could say no, and they always free float weight everything. So even if they did let it in early, it's only going to be in at 5% of its nominal real value. So what could happen in the S and P is much less dramatic, thankfully, than what could happen in the queues.
14:13 Barry Ritholtz? So really, this raises the question, is this just a one-off, a one-time technical distortion? Or is this going to be a recurring tax on index ownership for people who don't want to play the IPO game, don't want to play the stock picking game?
14:28 Speaker 04 Well, historically, I should point out, the academic research would suggest that getting IPOs into your index earlier is bad for the investor who's standing there before the transaction. So oddly, Vanguard's CRISP indexes from the Chicago Research Center for Pricing, those indexes have, some of them are accelerated to five-day induction after the IPO. And there's been a study around that, and it says that's kind of a bad idea. You're very likely to be buying the pop, and then sort of sitting on a long, slow decline back to what becomes some market value, market fair value. But the index tends to be the top tick. I think it's very easy to create a scenario where you could see something
15:12 Speaker 04 like that in the queues as these IPOs get added. But again, given that everybody knows precisely when the trade's going to happen, which is market on close 15 days after the IPO. You're probably going to see the ramp up well before that because everybody's going to try to be the one selling into that index buying.
15:30 Barry Ritholtz? So how do you solve this problem? Is it simply a matter of adjusting this for the full float? Hey, you're only going to put 5% out. Great, that'll be reflected in the weighting. Or do you just follow your existing rules in terms of how soon we add an IPO to the index after it goes public? So SpaceX has to wait the usual six months.
15:55 Speaker 04 Well, the question is, the should here is for who, right? As an investor, as a lowly end investor, what this is doing is creating more differentiation between indexes than we have previously seen, right? So we're going to look at the world as it is now. Well, now the queues, the Nasdaq 100 is for sure the hyper IPO. Get everything in fast, get everything in big. As long as it's listed on Nasdaq and it's not a financial company, you're going to get it in the queues. And so that's going to be the go, go, go index. S and P is somewhere in the middle. They're sort of trying to acknowledge this reality of the broken IPO market and maybe do things a little sooner. I would say most investors can probably ignore most of that because there are adults
16:40 Speaker 04 in the room. And then institutions, I should point out, aren't playing with any of this stuff. They all use MSCI indexes, right? And those have very static rulebooks that are very carefully adjudicated. And nobody's even talking about MSCI changing their rules about this stuff. So what this means is we're going to have much more differentiation between what passive means. And as an investor, that means you can no longer just say, I'm indexed, I'm fine. You're going to have to have an opinion.
17:09 Barry Ritholtz? Really, really fascinating. I'm deeply concerned about the everybody knows massive buying on close for SpaceX. What does this mean for price discovery? What does this mean in terms of distorting the true demand and supply relationship?
17:30 Speaker 04 It's hugely distortive.
17:33 Speaker 04 The problem is that normally what you could say is something like, all right, we'll let this transaction get out of the way and then things will calm down and then everything will be and then we'll find out what prices really are. Like when natural buyers and sellers actually show up in the market and have to think about it. The problem is that implies there's some future time when we can say things are now normalized. I would usually have said something like, ah, three to six months, things will settle down because in markets, three months is a long time. But I should point out, six months after this IPO, we get two things happening at the same time. Traditionally, when a lot of stock unlocks, right, 180 days is a very common unlock window. And second, NASDAQ is going to have to rebalance the index again.
18:16 Speaker 04 And if those things time perfectly, we're going to end up with a bunch of shares unlocking, meaning the flight float might go from, say, five to 15%. At the same time, NASDAQ will have to take their exposure from 15% to, say, 45% because they're going to be 3X whatever the float is on that rebalance. So we're going to have the exact same problem all over again as shares unlock and the index rebalances.
18:41 Barry Ritholtz? I assume the 3X was just for the thin IPO float. If that goes to 15% or 25%, it's 3X again? That's
18:51 Speaker 04 Until it hits a third, at which point, obviously, you're at 100%, right? So but that's, that's the way it happens linearly, but as float unlocks, three times that amount gets added to the index until
19:04 Barry Ritholtz? Why? What's the motivation for that?
19:06 Speaker 04 Because the NASDAQ 100 has never been free float adjusted. Now, it hasn't usually mattered because nobody really cares that Nvidia is 95% float and Apple is 92% float, but the index has always just included them at 100%.
19:21 Barry Ritholtz? Right.
19:21 Speaker 04 It's only, it's only a problem when it's very, very small. So what historically there's been is a floor. If only 10% of your shares are floating, you don't get to play at all. That's what they're getting rid of to replace it with this sort of weird multiplier effect.
19:36 Barry Ritholtz? It seems like, you know, we're talking about an index. It seems like this isn't a passive decision and it's coming from the folks at NASDAQ are making a very active bet. Hey, this Elon guy with Tesla was a giant win and S and P was late to the party adding them. Let's not make the same mistake with SpaceX. Is that the thinking?
20:01 Speaker 04 Yeah, I think that's exactly what's going on. It will for sure be a marketing tool for the index, certainly if SpaceX tears out of the gate, which with all this buying, you know, is more likely now. It definitely puts some tailwind behind the price of the stock when you have these known buyers. That's going to just take some time to roll through and look, I think it makes it a very active index. It already was. It has weird selections all through it, like non-financials, only on NASDAQ. It's a bizarre set of rules and now it's got this weird timed trading thing that you just mentioned. I think this makes it very tough for anybody to think of this as a long-term buy and hold
20:45 Speaker 04 investment where everything will just work out in the long run. It's now making some very active trading bets.
20:51 Barry Ritholtz? All right, so I'm going to make you the philosopher king of index inclusion rules. What does that look like in terms of waiting period, minimum float, profitability, governance, and just do we have different rules for mega IPOs than regular IPOs?
21:12 Speaker 04 If I was running the universe, if it was Dave Naughton's index company, companies would have to trade for a year. They would have to have a year of trailing profitability, which is what the S and P currently has. They're talking about getting rid of that, too. I would free float adjust everything without question, all the way down to nothing. Like you can float 1% of your stock and you get a 1% presence. Like I think that's fine and I would not count non-voting shares at all.
21:38 Barry Ritholtz? Period. Huh. Fascinating, fascinating stuff. So for investors interested in the SpaceX IPO, there are going to be a lot of trading anomalies around this IPO. It seems like the structure is very much set up by NASDAQ and others to goose the price higher. If you're a holder of Q's, well, maybe this has some impact around the edges. Some of it's going to offset, some of it could drive prices higher. But regardless, the IPO of SpaceX is going to impact your passive index. I'm Barry Ritholtz.
22:21 Barry Ritholtz? You're listening to Bloomberg's At the Money.
22:35 Speaker 05 Congratulations, you've built a dashboard. But now comes the follow-up question and the follow-up to the follow-up and the dashboard for that. Meet Hex. Give everyone the power to ask their own questions, explore data and build with AI, all in natural language. Because every answer should spark another question, limited only by your curiosity, not your data team's bandwidth. Go deeper than dashboards. Join over 2,000 leading data organizations. Visit hex.ai.
23:06 Speaker 06 Empower is all about helping you invest well so you can go out and live a little. And their free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals and more. Whether you're saving for something big, want to treat yourself, friends or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.
23:37 Speaker 02 With ChatGPT, you can do more than get answers. You can get things done. Whether you're leading a big project, planning an elaborate trip or trying to balance work and life, ChatGPT can help. Give it a goal, plus things like files, notes or project plans, develop a trip itinerary with daily updates or create a prioritized schedule so you can spend less energy sorting out the details and more on bringing your biggest ideas to life. Get started at chatgpt.com.
Previous Evolving Money: Stablecoins in Practice and Policy (Sponsored Content) Next Stopping Poor Financial Decisions with Former FDIC Chair Sheila Bair Page updated October 30, 2026 · transcript and summary are machine-generated
