Goldman Sachs Group, Inc. Breaks Down SpaceX (SPCX.US) Index Effect: Valuation, Volatility, and Concentration Almost "Imperceptible"

Goldman Sachs Group, Inc. strategist Ben Snider recently published a research report noting that despite widespread concerns ahead of SpaceX's (SPCX.US) record-scale IPO, the stock's steadily rising weight across major stock indices has caused almost no disturbance to index valuations and performance. Nearly five months after listing, about one-third of SpaceX's shares have entered free float trading, compared with only 5% at the time of its IPO. In a report published on November 6, Snider and his team wrote that the expansion of the free float has pushed up its weight in several benchmark indices, and index-tracking funds have increased their allocations to the stock accordingly. For index investors, this conclusion means that including SpaceX has not significantly changed the overall characteristics of their portfolios. Goldman Sachs Group, Inc.'s comparative calculations show that under the two scenarios of including and excluding SpaceX, the Nasdaq 100 index's valuation, volatility, and constituent concentration all change only modestly. **Modest impact on the Nasdaq 100** Among the major broad-based U.S. indices covered in the report, SpaceX has the highest weight in the Nasdaq 100 index, at about 2.5%. Goldman Sachs Group, Inc. estimates that the Nasdaq 100 index currently trades at 19.5 times forward 12-month earnings; excluding SpaceX, that valuation would fall to 19.2 times. Since SpaceX was included in the index, the Nasdaq 100 index has fallen 10.3% cumulatively; excluding the stock, the index would have fallen 10%. After including SpaceX, the annualized volatility measuring stock price fluctuations also rose only slightly. Under both calculation methods, the top ten constituents together account for 50% of the index; the top twenty constituents account for 67% combined, versus 64% excluding SpaceX. **Index rebalancing may bring buying** Report data show that as of the end of October, passive ETFs held a combined approximately US$30 billion of SpaceX shares, of which funds tracking the Nasdaq 100 index held about US$20 billion. As free-float shares increase further, index funds' holdings are expected to continue rising. Goldman Sachs Group, Inc. expects that as lock-up periods for existing shareholders expire successively, about half of SpaceX's shares will become publicly tradable by mid-2027. Before then, regular index adjustments may generate additional buying. Based on current data, Goldman Sachs Group, Inc. estimates that rebalancing of the Russell 1000 Growth Index will drive passive ETFs tracking the index to buy more than US$10 billion of SpaceX shares; the index's next scheduled rebalance is set for December 11. The report also noted that, constrained by the Nasdaq 100 index's methodology rules for stocks with low free float, this rebalancing will have a relatively limited effect on boosting SpaceX's weight within the Nasdaq 100 index. **Inclusion in the S&P 500 may have to wait until 2027** SpaceX has not yet been included in the S&P 500 index. Goldman Sachs Group, Inc. judges that under S&P's eligibility rules, it most likely will not qualify for inclusion until the second half of 2027. Under S&P rules, a stock must meet the following: at least 12 months since listing; and, on a GAAP basis, positive net income from continuing operations in the most recent quarter and on a trailing four-quarter basis. Based on market consensus earnings expectations, SpaceX will meet the profitability threshold after disclosing its second-quarter 2027 financial results; by then, the listing duration requirement will also likely be met. Goldman Sachs Group, Inc. added that another path is merging with an existing S&P 500 constituent. But such inclusion is subject to case-by-case review, and the timing is uncertain.