The highly anticipated initial public offering (IPO) of SpaceX is set to make waves in the financial markets as early as June 12. With the company aiming to raise $75 billion at a staggering $1.75 trillion valuation, this offering is poised to become the largest IPO in history, inevitably impacting many investors’ portfolios—even those who aren’t directly interested in purchasing SpaceX stock.
Approximately 156 million adults in the U.S. own stocks, with a significant amount of wealth tied up in S&P 500 index funds, mutual funds, and market-cap weighted growth-focused exchange-traded funds (ETFs) that are likely to hold SpaceX shares. Among these investment vehicles, the Vanguard Communication Services ETF is expected to capture a substantial share of SpaceX’s stock due to its focus on companies within the communication sector.
The upcoming IPO is anticipated to alter the market landscape, particularly as the S&P 500 and Nasdaq-100 prepare for a fast-track entry for mega-cap companies such as SpaceX. This expedited process allows newly public companies to bypass a traditional seasoning period—an evaluative phase that can create a lag and prevent index fund investors from benefiting from significant gains. SpaceX’s entry could follow a similar trajectory to that of Tesla, which saw delays in its inclusion in the S&P 500 despite a skyrocketing market cap since its public debut in 2010.
However, the valuation of SpaceX at $1.75 trillion presents unique challenges for index funds and passively managed ETFs. The relatively small float of $75 billion means these funds may need to weight SpaceX based on an adjusted value—potentially three to five times its available shares—rather than its full market cap. Even if ranked based on market cap alone, SpaceX would represent just over 2% of the S&P 500, a figure that could still yield substantial implications for investors relying on S&P 500 funds.
Looking specifically at the Vanguard Communication Services ETF, its focus on major players in the communication sector positions it as a promising option for those seeking exposure to SpaceX. Although it is yet to be determined which sector SpaceX will officially belong to within the Global Industry Classification Standard (GICS), the company’s revenue primarily derived from the Starlink satellite network and the ownership of social media platform X makes the communications sector a likely fit.
Should SpaceX enter the communications sector at an adjusted float valuation of $225 billion to $375 billion, it could surpass Verizon Communications, placing it as a key holding within the Vanguard Communication Services ETF. Notably, SpaceX plans to allow insiders some flexibility in selling shares ahead of the traditional 180-day lockup period, facilitating additional trading opportunities shortly after the IPO. This could open up the potential for SpaceX to transition from a float-weighted classification to a market-cap-based one by the end of 2026, further solidifying its position in the ETF.
The possibilities are abundant but remain speculative. If SpaceX secures its place in the communications sector and maintains its lofty valuation, it stands to become one of the top three holdings in the sector alongside giants like Meta Platforms and Alphabet.
In conclusion, for investors looking to gain significant exposure to SpaceX through an ETF framework, the Vanguard Communication Services ETF appears to be a compelling option worth considering as the IPO date approaches.
