Major mutual and passive index funds are boosting cash reserves and preparing to trim holdings in other large-cap stocks to make room for the upcoming IPOs of SpaceX and OpenAI.
Goldman Sachs' John Flood noted that ahead of the four largest IPOs in recent decades, funds raised cash. Now, rule changes at the Nasdaq 100 and S&P 500 will allow newly listed megacaps to join indexes faster, potentially triggering forced selling of existing positions.
SpaceX is targeting a valuation of around $1.75 trillion, which would make it the seventh-most valuable U.S. company. Meanwhile, OpenAI could be valued at $1 trillion or more at listing, and Anthropic is in talks for a near-$1 trillion valuation.
Deutsche Bank analysts said healthy household cash balances from the pandemic era will support demand for these new listings. Admission to key benchmarks like the S&P 500 provides deep institutional liquidity, although even the largest expected IPO represents just 0.1% of the S&P 500's current market cap.