The much-anticipated initial public offering (IPO) of SpaceX is set to potentially launch as early as June 12, aiming to raise an unprecedented $75 billion at a valuation of approximately $1.8 trillion. This landmark move would position SpaceX as the largest IPO in history, significantly impacting both capital markets and index levels upon its eventual inclusion in the S&P 500 and Nasdaq-100.
Despite this substantial valuation, SpaceX may not immediately rank among the top three holdings in S&P 500 index funds or even within growth-orientated exchange-traded funds (ETFs) like the Vanguard Growth ETF or Vanguard Meta Cap Growth ETF, as leading tech giants—including Nvidia, Alphabet, Apple, Microsoft, Amazon, and Broadcom—hold more considerable market caps.
However, there is speculation that SpaceX could emerge as a top-three holding within a specific low-cost ETF. The Global Industry Classification Standard (GICS) defines 11 stock market sectors, encompassing a complex landscape where leading companies, primarily from the tech sector, comprise a striking 38.6% of the S&P 500 index. Notably, upcoming IPOs such as Anthropic and OpenAI are also expected to join this sector later this year, further inflating tech’s dominance.
Interestingly, SpaceX may be better categorized within the communications sector due to its primary revenue driver, Starlink—a network of low-Earth orbit satellites providing high-speed internet access to remote regions. With a robust launch plan, SpaceX’s Starlink division ended the last fiscal year with 9,600 satellites and continues to add hundreds more each quarter. Additionally, SpaceX’s ownership of X (formerly Twitter), which previously listed in the communications sector, adds context to this alignment.
Should SpaceX achieve its projected valuation, it would surpass Meta’s $1.52 trillion and could significantly impact the Vanguard Communication Services ETF, where Meta currently holds a 20.3% weighting. Nevertheless, SpaceX’s inclusion and its relative weight in the indexes would not happen instantaneously. S&P 500 and Nasdaq-100 are updating their entry policies to reflect the rise of high-profile IPOs, enabling a fast-track inclusion of SpaceX within a few weeks post-IPO. Its representation in these indexes will likely be dictated by a multiple of its float, anticipated to be between three and five times its initial $75 billion float—translating to a market cap weight of approximately $225 billion to $375 billion.
At such a range, SpaceX would rank just above Verizon Communications, sitting as the fourth-largest holding in the Vanguard Communication Services ETF and constituting around 5% of that fund. The ETF itself, with a remarkably low expense ratio of 0.09%, might serve as a more appealing investment avenue for those looking to capitalize on SpaceX than standard S&P 500 index funds.
Investors are advised to analyze the Vanguard World Fund – Vanguard Communication Services ETF cautiously. Notably, the Motley Fool’s Stock Advisor team has recently identified their top ten stocks for long-term growth, with the Vanguard Communication Services ETF conspicuously absent from the list. Historical performance shows significant returns for those who acted on previous recommendations, emphasizing the potential advantages of strategic investing. As the launch date approaches, the financial community will closely monitor SpaceX’s IPO and its anticipated impact on the market landscape.
