SpaceX faces index-driven volatility as Russell funds prepare share purchases

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SpaceX index volatility

Highlights

FTSE Russell's semi-annual reconstitution after Friday's close requires passive funds to buy nearly $3 billion of SpaceX shares amid tight liquidity.
SpaceX stock, which surged 67% to $225.64 after its IPO, closed Thursday at $153, trading at 107 times 2025 sales despite last year's $4.9 billion loss.
SpaceX faces upcoming passive demand from July's Nasdaq 100 inclusion, while S&P Global blocks its S&P 500 entry due to unmet profitability requirements.

Russell reconstitution drives forced buying

As reported by Reuters, FTSE Russell is adding SpaceX to its Russell U.S. indexes after Friday's close as part of its semi-annual index reconstitution. That requires passively managed funds tracking those benchmarks, including exchange-traded funds such as the iShares Russell 1000 ETF, to buy SpaceX shares, likely in a tight window near the closing bell to reduce tracking error against the index.

Jefferies estimated earlier this month that passive funds need to purchase nearly $3 billion of SpaceX stock to align with the Russell indexes they follow. Because only about $100 billion of SpaceX shares are available for public trading, while the rest are held by Elon Musk, insiders and employees, that demand could tighten supply into Friday's closing auction.

SpaceX options expiring Friday are priced for a 3.6% move in either direction by the end of the week, according to Trade Alert data. Options positioning, however, appears relatively muted despite the expected index-related buying pressure.

Valuation debate and further index inclusion

Investors are still weighing how to value SpaceX after a strong but volatile run since its initial public offering this month. The stock rises as much as 67% to an intraday high of $225.64 on June 16 before falling to Thursday's close of $153, still above its $135 IPO price.

The company is trading at 107 times its 2025 sales following recent losses in the stock, a level far above Nvidia's recent multiple of 21 times sales. The valuation remains under scrutiny because SpaceX lost $4.9 billion last year, even as supporters expect it to lead markets tied to satellite internet, AI and commercial space launches.

Another wave of passive demand is approaching in July, when SpaceX is also set to join the Nasdaq 100, forcing major funds such as the Invesco QQQ ETF to add the stock. S&P Global, however, blocks the company from entering the S&P 500 after saying this month that it is not changing inclusion rules for megacap IPOs, including the profitability requirement based on the latest quarter and the most recent four-quarter total.

Our earlier report on SpaceX’s Starlink expansion outlined plans under consideration to take Starlink directly into the U.S. consumer mobile market, potentially including a retail mobile offering and even a terrestrial network buildout. We noted this would open a new growth avenue after the IPO but would also raise execution risks given the high cost of infrastructure and the company’s limited spectrum holdings versus major U.S. wireless operators.

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