Investment research firm Morningstar Inc. is revising its index construction rules to accommodate the unprecedented scale of upcoming initial public offerings, notably SpaceX's potential $75 billion IPO. The move aims to address liquidity requirements for "unicorns" immediately following their debuts.
This enhancement to Morningstar's CRSP Market Indexes will allow for the faster inclusion of giant IPOs into benchmarks used by major funds, including Vanguard's $607 billion Total Stock Market ETF. A company spokesperson stated, "Index providers must evolve eligibility rules to keep their benchmarks relevant to new market realities."
Other index providers are also considering similar adjustments. Nasdaq plans to expedite the addition of qualifying companies to its Nasdaq-100 Index, reducing delays from months to 15 days. S&P Dow Jones Global Indices is also contemplating rule adjustments for its S&P 500-stock index.
However, some investors express concern. Mark Malek, chief investment officer at Siebert Financial, stated, "The fact that some of these indexes may be lowering their standards... is concerning." He emphasized the importance of adherence to standards beyond just company size.