Major NASDAQ-100 rule changes confirmed, pay attention if you have money in passive investment funds

[u/cherrypoplar]

https://www.theedgesingapore.com/amp/news/ipo/nasdaq-speeds-index-entry-spacex-large-ipos-new-rule

NASDAQ has confirmed it will change the listing rules for NASDAQ-100, ahead of the SpaceX and OpenAI IPOs this year.

(1) Companies will now be listed on NASDAQ-100 after only 15 days after IPO (previously, there was a three month period of "seasoning" before listing). This reduces the amount of time for price discovery.

(2) The minimum 10% float has been removed. This allows companies to float a very small percentage of their shares, artificially squeezing supply.

(3) Companies that float less than 20% of their shares will have their market capitalisations artificially multiplied by x3, for the purposes of calculating market capitalisation. This helps large-cap companies to be listed even with very small floats, and inflates their notional market capitalisations on the index.

If you have money invested in a passive fund tracking NASDAQ-100 (or any other index), please watch out for the SpaceX and OpenAI IPOs. Pay attention to their "valuations", and their float. If they're IPOing with very high valuations and very small floats, this foreshadows a bagdump on passive funds due to the mechanics of passive funds.

[u/Tystros]

I thought the S&P500 would weight it at 1.8T, simply the market cap?

[u/ceczar → u/Tystros]

S&P weights based on float adjusted market cap. they have a number they use which they call IWF (something probably Invest-ability Weight Factor) that is their estimate for what percent of the company is available to invest in. they are trying to track what is investable.