The SpaceX hype right now is all about one idea.
SpaceX has a market value of roughly $2.5 trillion, so when it gets added to the Nasdaq 100, people think index funds will be forced to buy an enormous amount of stock.
Sounds simple.
But there is one detail a lot of people seem to be skipping.
Only about 4% of SpaceX shares are actually available to trade.
Because of Nasdaq’s float-adjustment rules, the index does not treat SpaceX like a full $2.5 trillion company when calculating its weight.
The effective size for index purposes ends up being closer to $300 billion, not $2.5 trillion.
That’s a huge difference.
I’ve seen people talking like every dollar tracking the Nasdaq is about to pile into the stock.
But the actual forced buying from QQQ and other index funds is probably somewhere in the few billion to $20+ billion range, not hundreds of billions.
Still a lot of money.
Just not the number people keep throwing around.
The funny part is that the stock could still move aggressively anyway.
Not because index funds are buying trillions of dollars worth of shares.
But because there are not many shares available in the first place.
So the real story might not be massive index buying.
The real story might be what happens when a lot of buyers are chasing a very small supply of stock.
That’s a completely different argument.
WSJ on faulty index logic: https://www.wsj.com/finance/stocks/the-faulty-logic-behind-the-spacex-index-trade-6d016991
Spotgamma on inclusion buying: https://spotgamma.com/spacex-ipo-index-changes-spotgamma/
Morningstar on index adaptation: https://www.morningstar.com/funds/spacex-ipo-how-index-funds-are-adapting