The highly anticipated SpaceX (NASDAQ:SPCX) IPO was an event to be remembered by investors. The event also saw calls for major stock market indexes to change their inclusion rules to fast-track one of the world’s largest companies for inclusion. While the S&P 500 held their ground, legendary investor Jeremy Grantham says the Nasdaq "cheated" to put SpaceX in the Nasdaq 100 early.
Grantham on SpaceX IPO
In a recent podcast appearance, GMO co-founder Grantham called SpaceX "the craziest IPO in the history of man."
The legendary investor shared his thoughts on SpaceX, the company’s lack of profitability, and its early inclusion in the Nasdaq-100 with Morningstar on "The Long View" podcast.
"$1.7 trillion for a company that’s rolling in red ink when 90% of the projection are on the AI of their currently third-rate AI offering who’s getting kicked around the block by Anthropic and OpenAI and so on," Grantham told Morningstar. "Just amazing."
The investor said JPMorgan and others are recommending SpaceX stock to clients, and there will be early demand thanks to the Nasdaq changing its rules.
"For one thing, it’s Nasdaq has cheated and changed the laws of the land so that they can squeeze it into the Nasdaq index despite the fact it has no earnings, etc. What that means is there’ll be a lot of people who have to buy it for any index that is Nasdaq-y."
Grantham said this means there could be more demand than sellers for SpaceX stock.
Benzinga reached out to the Nasdaq and SpaceX for comment and did not hear back at the time of publication.
Nasdaq Changes Rules, S&P 500 Stays Mostly Firm
The Nasdaq (NASDAQ:NDAQ) changed its inclusion rules for the Nasdaq 100, which is tracked by the Invesco QQQ Trust (NASDAQ:QQQ). The index fast-tracked SpaceX stock for inclusion 15 days after the IPO, instead of the normal three-month seasoning period.
The index company also changed its 10% minimum float rule to a 3x weighting boost for low-float stocks.
As of Thursday, SpaceX is the 21st-largest holding in the Invesco QQQ Trust, accounting for 1.25% of assets.
Nasdaq President Nelson Griggs previously told Bloomberg that no rules were broken by changing the rules of the Nasdaq 100. SpaceX ultimately chose to list on Nasdaq rather than the New York Stock Exchange, a decision that some believe may have been influenced by Nasdaq’s change to its index rules.
With its large market capitalization and early inclusion in the Nasdaq-100, billions of dollars in SpaceX shares were needed for ETFs and mutual funds. This also means that investors who avoided the SpaceX IPO may now have exposure to the large space stock through ETFs and mutual funds they hold in their accounts.
The S&P 500 eased its float requirements for inclusion in the index but failed to approve fast-track rules or a change to its profitability rule. To be included in the S&P 500, a company has to be profitable in the most recent quarter and profitable by the sum of the last four quarters combined.
SpaceX does not currently meet the profitability requirements.
The S&P 500 also has a 12-month requirement before a public stock can be added.
Freedom Capital Markets Chief Market Strategist Jay Woods was among those who argued against allowing SpaceX early entry into the S&P 500.
Woods said the listing criteria for stocks in the S&P 500 matters.
“This isn’t bureaucratic red tape. It is the product of decades of hard lessons about what makes an index durable, reliable, and trustworthy for the trillions of dollars benchmarked against it,” Woods previously said.
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