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Short, accessible essays that translate the academic work into something a wider audience can use. Mostly written ahead of events I find interesting, sometimes after.
- ·12-minute read·Index Inclusion · Passive Investing · SpaceX · Market Structure
The first forced buyers arrive today, and the stock has already run to meet them
Marking the pre-IPO call to market: an updated forced-bid number, a new options market pricing the inclusion more honestly than the cash tape, and why the real cliff is still in August.
Last week I argued the realized forced bid for SpaceX would be a lot smaller than the headline figures, that most of the price move would arrive before the funds actually bought, and that the real turn would come in August when the lockup unwinds. Today, the first mechanical wave finally hit. SpaceX is up about 37 percent from the IPO before a single index dollar landed, the new options market is pricing 90 percent vol with a skew that flipped from fearing the lockup to chasing the inclusion, and the biggest inclusion of all, the Nasdaq-100 on July 7, is still three weeks away.
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- ·14-minute read·Index Inclusion · Passive Investing · SpaceX · Market Structure
How much SpaceX will the world be forced to buy, and what it will do to the price
The largest stock sale in history is a live experiment on a strange modern force: investors who must buy a stock, at almost any price, because it joins a list.
When SpaceX lists today at around $1.77 trillion, most of the coverage will be about Elon Musk. I want to ask something narrower and, I think, more revealing: how much SpaceX will fund managers be forced to buy, simply to keep pace with the indexes their performance is judged against? My answer is closer to $9 billion than the $14 billion making headlines, almost all of it from index funds rather than stock pickers. Small as that sounds, it lands on so little tradable stock that it should still move the price hard.
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