The big day has arrived!
In a matter of hours, Elon Musk’s artificial intelligence (AI) and space economy conglomerate, SpaceX (NASDAQ: SPCX), will make its debut and cement itself as the largest initial public offering (IPO) in Wall Street’s storied history
SpaceX’s debut also starts the clock on its entrance into the technology-driven Nasdaq-100, and the Russell 1000 and Russell 3000 indexes. Although the committee overseeing additions to the benchmark S&P 500 (SNPINDEX: ^GSPC) chose not to amend the rules governing index inclusion, changes to the Nasdaq-100 and Russell Equity Index Series inclusion methodology can fast-track SpaceX’s entrance into these indexes after 15 (Nasdaq-100) and five (Russell Equity Index Series) trading sessions. But while retail investor enthusiasm surrounding this IPO is thick enough to cut with a knife, there’s an equally long list of justifications why SpaceX stock should be avoided like the plague.
There are seven reasons, comprising structural, operational, valuation, and historical components, why SpaceX has no business in my (or your) investment portfolio. 1. Structural protections were removed, paving the way for insiders to cash out Arguably, the most glaring warning with the SpaceX IPO is the aforementioned structural changes to index inclusion, coupled with the company’s unorthodox lockup period. Fast entry into the Nasdaq-100, Russell 1000, and Russell 3000 will force index funds to spend tens of billions of dollars purchasing SpaceX shares shortly after its debut.