u/Healthy-Loss1115

Just watched Ben Felix's video "SpaceX and OpenAI: The Mega IPO Grift." It highlights a massive structural flaw in indexing that directly impacts anyone holding VWRA or CSPX.

https://www.youtube.com/watch?v=iOyFja87uyw

When these mega-companies go public, passive investors are going to get hit by three specific mechanics:

• The Front-Running Tax: Total market indices often fast-track mega-IPOs within 5 days. Hedge funds know this and buy up shares early, driving the price up 5% before index funds are forced to buy. Once index funds pile in, the price drops. Academics call this an implicit tax paid by passive investors to Wall Street.
• The Low-Float Trap: SpaceX plans to float less than 5% of its shares. This tiny supply plus forced index buying will create an artificial price spike. Historical data shows 10 out of 11 large, low-float IPOs crash by 60% within three years. At a 1.75 trillion dollar valuation, SpaceX would trade at over 100x Price-to-Sales (the S&P 500 average is 3.1x).
• The Valuation Drag: Because companies list when their valuations are inflated, index funds inherently buy high and sell low. A 2026 paper calculated that this structural rebalancing flaw costs passive investors 46 to 69 basis points annually. That completely eclipses the expense ratios of VWRA (0.22%) or CSPX (0.07%).

Questions for the community:

1. CSPX: The S&P 500 usually requires 12 months of trading and proven profitability before inclusion, which protects us from IPO junk. If S&P changes its rules to fast-track SpaceX, are CSPX holders walking into a trap?
2. VWRA: FTSE weights by free-float, so a 5% SpaceX float limits its index weight. But what happens if OpenAI or Anthropic launch with standard floats?

Is anyone doing anything to curb this?

Always liked the nato strap look - picked this off Aliexpress.