Key Points
Since its initial public offering, SpaceX has become one of the ten largest companies in the world.
Since the Nasdaq-100 is weighted by free-float market capitalization, SpaceX’s share of the index will be much smaller than its size would suggest.
At the moment, SpaceX is not even among the top 20 holdings in the index. Its current weight is 1.25%.
Space technology(NASDAQ: SPCX) joined the Nasdaq-100 index on July 7. ETF Invesco QQQ(NASDAQ: QQQ) or Invesco Nasdaq 100 ETF(NASDAQ: QQQM)now you have a part of it too.
SpaceX has received a lot of attention since its initial public offering (IPO). But now that it has been added to major market indices, the most important step is to evaluate its impact.
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What may surprise many is that despite a huge market capitalization of $2 trillion, the stock is not that influential in the market. Nasdaq-100 as you might think. And this is perhaps the biggest takeaway from this story.
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SpaceX isn’t even in the top 20 of the Nasdaq-100 holdings.
Cause SpaceX’s only relatively minor impact on the index is the difference between total market capitalization and free float capitalization. market capitalization.
Free float market capitalization only takes into account those shares that are publicly traded. For SpaceX, that’s about 5% of the total shares available. Most companies only have a percentage of their shares traded publicly, but SpaceX’s is below average.
Based on total market capitalization, SpaceX will be among the ten largest companies in the world. But since the Nasdaq-100 uses free-float market capitalization, it is only the 21st-largest holding in the index, between UAC And Texas instruments. Its weight is 1.25%.
SpaceX will not have a significant impact on the Nasdaq-100
If you buy the Invesco QQQ ETF or the Invesco Nasdaq 100 ETF expecting to get a significant stake in SpaceX, you’ll likely be disappointed.
Even a major stock market rally or crash will likely not be felt by the index. The only thing potentially worth keeping in mind is the volatility of the stock. The IPO price was set at $135. It initially traded at around $150 when it went public, reached $225, and has now fallen back to $149.
There is a lot of noise in the trading behavior of these stocks. From investors trying to get their hands on shares for the first time to the stock industry buying millions of shares to track underlying indexes, volatility in SpaceX could be above average for a while until things stabilize a bit.
The next major milestone will be next summer, when the stock becomes eligible for inclusion in the index. S&P 500 Index(SNPINDEX: ^GSPC). While there will be another wave of buying if and when this happens, expectations for the day should also be tempered. The S&P 500 index is also publicly traded, market cap-weighted, and may have an even smaller share there.
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David Dierking has positions in the Invesco NASDAQ 100 ETF. The Motley Fool has positions in and recommends KLA and Texas Instruments. The Motley Fool has a disclosure policy.
