Nasdaq rewrites its index inclusion rules ahead of SpaceX IPO

Now, a stock is eligible for fast-track inclusion after just 15 trading days, with almost no float if its market capitalization places it among the top 40 holdings of the Nasdaq-100.

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With only a thin slice of equity available, SpaceX’s price discovery process may be driven less by fundamentals and more by supply-demand imbalances. A relatively small number of buyers and sellers will effectively determine the valuation of a multi-trillion-dollar company.

One of the reasons I'm not a fan of passive investing. Passive investing only works under the assumption that there are enough active investors out there properly pricing in information and applying rational analysis to the market. If enough people are passively investing, then you'll lose a lot of rational price discovery. Some will say that this is naturally self-correcting, since active investors will always be able to profit off irrational valuations. But, if the market doesn't correct for longer than you can stay solvent or, in the less extreme case, stay within an acceptable band of performance, then your clients will take their wealth to another fund. Add in post-2008 moral hazard (or as Buffet has called it, the "too big to fail" paradigm), the growth of unsophisticated retail investing, and rational investors trading off expectations of irrationality within the market, it becomes harder to impossible to make sustained bets on truly fundamental rational analysis. And, once the canonical valuation models start to fail or underperform, the game theory starts to really favor trading off of momentum and sentiment over true fundamentals.

SpaceX's plan is to create an absurdly high valuation through a small portion of the market that's highly risk-loving, cynical, and/or irrational, then to stabilize that price through an accelerated entry into the Nasdaq-100.

On a related note, I found this excerpt a little funny:

Still, even with the perceived misalignment, some rules probably did need to change.Taking a $200 million company public is different from $2 trillion one. SpaceX is not the only company that stayed private for a long time period as it grew. When these large entities do go public, the initial float must be small. The IPO would be too large for the market to digest.

"Too large to digest" = bullshit valuation.