https://indexes.morningstar.com/insights/analysis/bltcd8e699...
These IPOs will have minuscule impact on the indexes initially. They will have a big impact if they can maintain share price in the first ranking/reconstitution after the lockup period expires.
I'd like to know how the CRSP/Morningstar folks feel about the interesting lock-up period rules that Elon has inserted into the SpaceX IPO and how that jives with their analysis.
This particular one, the CRSP total market - which Vanguard uses for VTI - has a “modern” methodology that is thought to be very good. Once every three months they re-rank the entire market and assign weights based on the market as of a particular point in time. Then, a randomly-chosen number of days later, the fund (Vanguard) begins a weeklong reconstitution process in which they buy and sell stocks to reflect the new weights. It is intentionally a weeklong process so that the market is setting prices and not Vanguard with the size of their orders.
The lockup expiry happens, the market reacts, the market is re-weighted, the index reconstitutes. In that order. The price of the stock has to survive the increased float to force the index fund to buy lots more shares.
The float requirement changes are directly due to these huge IPOs only placing small amounts of float on the market. Their goal seems to be tracking the market and making this change prevents them from excluding two notable companies from their indexes.
IIRC CRSP indexes are float-weighted so they aren't going to attempt buying a ton of these IPOs anyway due to that low float.
Again. Would I have made the change? No because placing that little float on the market isn't kosher IMO.