Weekend reading: will the SpaceX, OpenAI, and Anthropic floats sink index funds?
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Looking forward to reading the weekend links (on Eurostar to Paris! 😉 ) and thanks as always for the time and care putting them together.
Guess Anthropic*could* be the real deal.
Claude 4.8 is/about to drop, revenues exponential (5x run rate since end 2025).
SpaceX not so much.
Impressive tech achievement. Take my (Yorkshire man’s cloth) cap off to that.
But break it down and you’ve got a profitable satellite launch company which is (to date) heavily dependent on Starlink, which (given cost to user) is, in turn, a demand (not capacity) constrained market.
Due to (Space based radiative to vacuum versus Earth bound convective to atmosphere) cooling and maintenance issues, I’m very much not convinced that orbital / Lagrange point data centres can be made to ‘work’, if not fail technically then at least not pay off economically.
And then this business is mated in this IPO with the deeply loss making xAi, which is declining IMHO (Grok is definitely in the 3rd tier here, behind Claude, and then both of OAI / GPT 5.5 and Alphabet / Gemini 3.5).
To wit, you’re paying upfront on faith for a hell of a lot of future growth on an at best (for any operating segment) very low double digits revenue growth.
Whereas Anthropic at 5x in 5 months (admittedly unsustainable) is coming in at a ludicrous revenue run rate increase CAGR of about 3,000%!!!
Even if that falls next year to low hundreds of percent annualised, it’s just a so much more meaningful proposition than Musk’s madness (with or without the Mars stuff).
Two ways to avoid Space-X in your tracker funds:
* Change your trackers to FTSE World ESG which won’t include Space-X for some time or maybe never. A lot of pensions already use this index.
* Split your funds into ex-US and US. Assuming your US fund tracks S&P 500 it’ll be added after 6 month, which is much more reasonable than the 5 days it’ll take to be added to FTSE World.
Since you arrived is a very good website, the amount of information being transmitted is scary !
I think I read somewhere that Standard Oil had a market cap of around 6% of the total USA stock market back in 1911. This before it was forced to list as subsidiaries to comply with anti trust legislation. The market cap then was $1 billion,so maybe history is rhyming again. Who would bet against XOM today?
Sorry, trying to watch but no confirmation email
Given the free-float weighting, I’m very relaxed. That MSCI article is desperately trying to make it sound like a big deal, but the statistics in the article itself make clear that it really isn’t.
I was reading an article by Fidelity which says that the Baillie Gifford valuation for Space X is $1.25 trillion, on the basis of which the exposure at SMT is 19.3%. So if it does float at $1.75 trillion, the exposure becomes even higher, what happens then? One of the reasons to hold SMT is to get exposure to these sorts of opportunities of course , but these numbers are kind of overwhelming.
Morgan Stanley Capital International, Financial Times Stock Exchange Actuaries, National Association of Securities Dealers Automated Quotations and Standard & Poor all compete over their respective indices use in ETPs, and that creates a potential for conflict of interest issues.
The pressure is real to include IPOs with unproven and/or stretched pricing/valuation (IPO = It’s Probably Overpriced 😉 ) and/or arguably inadequate free float.
OTOH this rodeo has happened before, and will happen again.
Moreover, for SpaceX the IPO float is (by index provider) only going to be 0.2-0.7% of the total tracked index market cap.
So some perspective may be in order:
https://youtu.be/5_EYTpVFK1Q?si=t3GiZKsXG-FDn2hd
But, then again, if the likes of Mike Green are indeed right on passive share leading to a distortion of market structure, to the impairment of efficient price discovery and to rising illiquidity relative to market capitalisation; then, on his maths, we’re looking at around a 25x passive flow to market cap impact multiplier, which, of course, could go either way depending upon how this IPO lands (no pun intended), but which will be a big splash (pun intended) in either event.
@Delta Hedge
I entirely agree that perspective is important. But these changes feel, to me at least, like an erosion of standards. And that worries me for the longer time.
@JPGR #9: S&P index inclusion committee now not playing ball with Musk. Thank goodness.
SpaceX will have to prove itself over it’s first year as a listed publicly trades entity.
This quant has modelled what early index inclusion might have meant (on 3rd June, just before Standard & Poor made their decision):
https://open.substack.com/pub/hmaquant/p/the-30-trillion-forced-bid-what-spacexs
@ Delta Hedge #10 – that’s true of the S&P 500 index, but not of all the S&P indices. So, good news in the round – but you can’t always get (100% of) what you want.
But you can get what you need! 😉
On the subject of which, I have to take issue with “How to make a living as an artist” (fnnch) in the links above, which I’ve just (very belatedly) read.
Look, maybe I’m being too philosophical here, but ‘Art’ is Not a Business.
Art is the anguished ‘Munchian’ Scream from within. The sincerest expression of the inner eye, the interior voice. It ain’t about shipping product (aka ‘Content’) for ‘The Man’.
If you’re a successful solotrepreneur, then more power to you.
But you can’t also, and simultaneously, be an ‘artist’; any more than the black pyjama clad functionary in the DPRK Agitprop Department producing posters lauding Juche and the Kim dynasty is, or can be one, either. No authenticity. Simulacra and simulation.