A small step for SpaceX; not a giant leap for indexing

The SpaceX initial public offering was launched amid a blast of media attention in June, creating anticipation that the new public company, with a market value that was then pegged at $1.7 trillion, would soon dominate many index-based equity products.

Many advisors and end clients have questioned the potential impact of SpaceX (Ticker: SPCX) and other pending large technology-related IPOs on equity indexes. And this is during a time when broad indexes are dominated by tech names.

Satellite positions: But the SpaceX IPO demonstrates that the journey in market capitalization and strength in indexes starts with a small step, a point which can be helpful for sharing with clients so that they can see the impact of this and other large IPOs.  

In Vanguard’s index-based funds and ETFs, SpaceX initially has taken up satellite positions, about 0.30% or less for most index funds, which is in line with Vanguard’s initial projections:  

Lift off: SpaceX positions in Vanguard funds as of June 30, 2026.

Source: Vanguard as of June 30, 2026.

Nearly weightless: Why are the weights so small? Because companies’ portion in indexes, and thus index funds, is based on the value of the companies’ shares that are available for public investors to buy (referred to as the “float-adjusted capitalization”).

By contrast, the headline value, often reported in the media, includes shares privately held by insiders and other select investors, which are not counted by index providers.

Only about 5% of the SpaceX shares were released to the public. While that release was a still sizable $75 billion, it is still small in comparison with the large-cap stocks that dominate the U.S. public equity market.

What’s different: SpaceX was able take advantage of “fast-track” inclusion rules, which are new for some index providers. Morningstar/CRSP, FTSE, Russell, and NASDAQ now allow inclusion of mega IPOs soon after they start trading, instead of waiting for months or more, or requiring a larger initial float size, as was previously the standard.

SpaceX was counted as part of most indexes within five to 15 trading days. One exception: S&P decided to adhere to its current rules in its S&P 1500 Composite Series (including the S&P 500), which require a company to be profitable in its most recent quarter as ​well as for the sum of its most recent four quarters.

What’s next: Going forward for SpaceX—as well as for other prominent IPOs expected this year, such as Anthropic and OpenAI—market weighting in indexes will depend on the performance of the stock price and the number of shares that become available.

As employees or other IPO participants sell their shares, a larger float will be reflected in the indexes and in index-based funds—but only if the market continues to price the shares at the current or higher levels.

Rodney Comegys, chief investment officer of Vanguard Capital Management and head of Global Equity, explained market valuation of public float has been embedded in indexing from the beginning, and continues to serve investors well.

“From the start, index investing rested on a few core principles: broad diversification, low costs, transparency, and letting the markets determine outcomes,” Comegys said. “Those principles weren’t designed for any single era. They were designed to hold up as markets change.”

Notes:

For more information about Vanguard funds, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

All investing is subject to risk including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Past performance is no guarantee of future results.

Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility.

The Morningstar Indexes are the exclusive property of Morningstar, Inc. Morningstar, Inc., its affiliates and subsidiaries, its direct and indirect information providers and any other third party involved in, or related to, compiling, disseminating, computing or creating any Morningstar Index (collectively, “Morningstar Parties”) do not guarantee the accuracy, completeness and/or timeliness of the Morningstar Indexes or any data included therein and shall have no liability for any errors, omissions, or interruptions therein. None of the Morningstar Parties make any representation or warranty, express or implied, as to the results to be obtained from the use of the Morningstar Indexes or any data included therein.

The Russell Indexes and Russell® are registered trademarks of Russell Investments and have been licensed for use by The Vanguard Group, Inc. The Product(s) are not sponsored, endorsed, sold or promoted by Russell Investments and Russell Investments makes no representation regarding the advisability of investing in the Products.

London Stock Exchange Group companies include FTSE International Limited ("FTSE"), Frank Russell Company ("Russell"), MTS Next Limited ("MTS"), and FTSE TMX Global Debt Capital Markets Inc. ("FTSE TMX"). All rights reserved. "FTSE®", "Russell®", "MTS®", "FTSE TMX®" and "FTSE Russell" and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under license. All information is provided for information purposes only. No responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither the London Stock Exchange Group companies nor any of its licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Indexes or the fitness or suitability of the Indexes for any particular purpose to which they might be put.