S&P Dow Jones Indices Proposes Easing MegaCap IPO Rules for S&P 500 Eligibility Ahead of SpaceX Debut

S&P Dow Jones Indices opened a consultation on April 30 that proposes shortening the seasoning period for MegaCap companies from 12 months to six months, waiving the requirement of four quarters of positive GAAP earnings plus a positive most recent quarter, and dropping the minimum float requirement of 10 percent of shares actually trading.

A MegaCap is defined as any company whose total market capitalization is at least that of the 100th-largest name in the S&P Total Market Index, about $112 billion. Comments on the consultation closed on May 28, and any adopted changes would take effect before the market opens on June 8.

75 trillion and a multiple of roughly 110 times revenue. Anthropic filed for an IPO on Monday, and OpenAI is rumored to go public next quarter. None of the three companies is profitable; SpaceX lost billions last year.

To enter the S&P 500 under current rules, a company must show a positive sum of four quarters of GAAP earnings and a positive most recent quarter. Tesla remained outside the index until the end of 2020 because it did not meet the profitability requirement. Nell Minow said the proposed changes run counter to the purpose of an index.

“They had to bend the rules to get into the Nasdaq index—they would never qualify normally,” she said. She added that an index “is supposed to say, we will do the work for you, we will only put into the index companies that meet these specific qualifications.

” As of December 2024, S&P Dow Jones Indices estimated that $20 trillion was indexed or benchmarked to the S&P 500, of which approximately $13 trillion consisted of passively managed assets.

After Nasdaq adopted its Fast Entry rule in March, Goldman Sachs analysts estimated the change could trigger up to $60 billion in forced buying across the Nasdaq-100. Minow said the largest institutional holders would not accept the changes. She stated that heads of major retirement funds would call Vanguard and Fidelity to create a new index excluding these companies.

The Fortune 500 Innovation Forum will convene in Detroit on Nov. 16-17.