SpaceX set for Nasdaq-100 debut on Tuesday after rule change accelerates inclusion

SpaceX Corp (NASDAQ:SPCX) is scheduled to join the Nasdaq-100 index before US markets open on Tuesday, marking one of the fastest additions to the benchmark following its recent initial public offering.

The inclusion follows a change to Nasdaq's eligibility rules that allows certain large-cap IPOs to enter the index after 15 trading days, rather than waiting for the next annual reconstitution.

The move is expected to trigger billions of dollars in passive buying as exchange-traded funds and mutual funds that track the Nasdaq-100 rebalance their portfolios. JPMorgan has estimated that approximately $4.3 billion of SpaceX shares could be purchased by index-tracking funds, including the Invesco QQQ Trust (NASDAQ: QQQ) and Invesco Nasdaq 100 ETF (NASDAQ: QQQM).

Despite SpaceX's roughly $2.1 trillion market valuation, the company is expected to receive an index weighting of around 1%. The Nasdaq-100 is weighted by free-float market capitalization, meaning only shares available for public trading are included in the calculation. With less than 5% of SpaceX's outstanding shares publicly available following its IPO, the company's weighting is expected to remain relatively modest.

The addition also comes as SpaceX's post-IPO quiet period expires, allowing investment banks and research firms involved in the offering to begin publishing analyst coverage and price targets.

Ipek Ozkardeskaya, senior analyst at Swissquote, wrote that investors will continue debating whether technology stock valuations are justified as SpaceX joins the Nasdaq-100.

"Remember, Nasdaq changed the inclusion rules to include SpaceX, which would normally not make its way so quickly into such a broadly watched and traded index, given its extremely low free float, its governance – Elon Musk has more than 80% of voting rights – and its fundamentals, as the company went public at a valuation of more than 100 times last year's sales," Ozkardeskaya wrote.

She added that "SpaceX's inclusion will increase the Nasdaq 100's volatility, challenge its capacity to represent underlying economic and financial fundamentals, and potentially hurt its credibility."

Ozkardeskaya also noted that the end of the quiet period will bring the first wave of Wall Street research on the stock, while "the early enthusiasm faded fast, with the price coming close to its IPO level after a more than 50% surge in the early days."

SpaceX shares have experienced volatile trading since their market debut. The stock closed at $162 late last week, above its IPO opening price of $150 but more than 20% below its post-listing high. Shares fell another almost 4% to about $156.

Unlike the S&P 500, which generally requires companies to trade publicly for at least a year before becoming eligible for inclusion, the Nasdaq-100's revised fast-track rules were designed to accommodate large IPOs more quickly. SpaceX will be added to the index in a single rebalancing event rather than in phased installments.