U.S. funds prepare for mega IPOs from SpaceX and OpenAI

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U.S. funds eye mega IPOs

Highlights

Benchmark providers like S&P 500 and Nasdaq 100 are introducing rules to expedite inclusion of megacap IPOs such as SpaceX, OpenAI, and Anthropic.
SpaceX aims for a valuation around $1.75 trillion at IPO, making it one of the most valuable companies in the U.S. by recent share prices.
Deutsche Bank notes large household cash balances will boost IPO demand, but even top IPOs would represent just over 0.1% of S&P 500 market capitalization.

Index changes reshape IPO positioning

As reported by Reuters, fund managers are adjusting portfolios as benchmark providers including the S&P 500 and Nasdaq 100 roll out rules that are expected to accelerate the entry of newly listed megacap companies. That shift is prompting passive investors in particular to prepare for rebalancing if some of the biggest private companies move into public markets.

John Flood, managing director in Global Banking & Markets, FICC & Equities at Goldman Sachs, said in a May 22 note to clients that passive funds could be forced to trim other large-cap positions to make room for newly public companies. He added that before each of the four largest IPOs in recent decades, U.S. equity mutual funds increased cash balances as investors focused on the effect of major listings in the pipeline.

SpaceX is targeting a valuation of about $1.75 trillion in a listing that would place it among the most valuable companies in the U.S., based on recent share prices. OpenAI and Anthropic are also pursuing access to public markets in the coming months, and their recent valuations suggest they would also likely qualify for fast entry into key benchmarks.

Liquidity boost may come with market pressure

Deutsche Bank analysts said in a Tuesday note that retail investors' cash reserves are likely to support demand for new listings, arguing that both the capacity and willingness to invest in equities remain strong. They said that view is backed by large household cash balances built up during the pandemic.

Inclusion in indexes such as the S&P 500 or Nasdaq 100 can widen a company's shareholder base by drawing in institutional investors that buy for index-tracking funds, while also improving trading liquidity over time. For executives and early backers, that deeper liquidity can soften the market impact of large share sales after lockup periods expire, usually 90 to 180 days after an IPO, although it does not eliminate the risk that insider selling weighs on the stock.

Flood said large IPOs that are fast-tracked into major indexes would initially carry only small benchmark weights, with their influence increasing as float factors rise. Deutsche Bank analysts added that even the biggest expected IPO sizes amount to a little more than 0.1% of the current S&P 500 market capitalization.

In our earlier article on SpaceX’s Starship test progress ahead of a potential IPO, we explained how the latest V3 flight met most key objectives—such as mock satellite deployment and a controlled splashdown—while still falling short on a controlled booster landing. We also noted that, despite renewed investor confidence, execution risks around full reusability, timelines, and cost targets could still influence SpaceX’s valuation and the broader investment case tied to Starlink expansion and longer-term orbital infrastructure plans.

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