Honestly these IPOs are likely to kill the market. Once the necessary disclosures are out, and the worse-case math people are assuming turns out to have been way more optimistic than the actual truth, the entire market is likely crashing since the money is so spread out. So far there has been zero good news from an investment perspective out of LLM centered companies outside of what are ultimately just complex financial engineered investments.
If they get into the S&P 500 at a $300B market cap that puts them at #30, just behind Coca-Cola. They'll make up about half a percent of the index and then will have a ready supply of price-insensitive buyers in the form of everybody who puts their retirement fund into an index fund on autopilot.
Well they'll hit the requirements for company size and country of domicile, but aren't yet at the other requirements, of profitability and a minimum of 12 months after an IPO so they have a chance of being added.
As to the size of the bump they'll get there isn't a single rule of thumb but larger cap companies tend to get a smaller bump, which you'd expect. I've seen models estimate a 2-5% bump for large companies and a 4-7% bump for mid level and 6-12% for "small" under $20 Billion dollar market cap companies.
SP500 is a capitalization* weighted index, hence it is very price sensitive.
Everybody who puts their retirement fund into an index fund are buying the index fund without relation to the index fund's price (aka price insensitive). But the index fund itself is buying shares based on each company's relative performance, hence the index fund is price sensitive. That is evidenced by companies falling out of the SP500 and even failing.
>The goal of float adjustment is to adjust each company’s total shares outstanding for long-term, strategic shareholders, whose holdings are not considered to be available to the market.
The S&P 500 is inversely price sensitive, as a capitalization-weighted index. Normally you want to buy low and sell high. An S&P500 index fund buys more of high-priced stocks and sells the low-priced ones, by definition. The highest market caps are the stocks with the highest prices (adjusted for number of shares outstanding, of course).
For most ordinary investors, this doesn't really matter, because you put your money into your retirement fund every month and you only take it out at retirement. But if you're looking at the short term, it absolutely matters. I've heard S&P 500 indexing referred to as a momentum investment strategy: it buys stocks whose prices are going up, on the theory that they will go up more in the future. And there's an element of a self-fulfilling prophecy to that, since if everybody else is investing in the index fund, they also will be buying those same stocks, which will cause them to go up even more in the future.
If you want something that buys shares based on each company's relative performance, you want a fundamental-weighted index. I've looked into that and I found a few revenue-weighted index funds, but couldn't find a single earnings-weighted index fund, which is what I actually want. Recommendations wanted; IMHO the S&P 500 is way overvalued on fundamentals and heavily exposed to certain fairly bubbly stocks (the Mag-7 alone make up 35% of your index fund, and one of them is my employer, and all of them employ heavily in my geographic area and are pushing up my home value), so I've been looking for a way to diversify into companies that actually have solid earnings.
While it is true that being added to the SP500 can lead to an increase in demand, and hence cause the index fund to pay more for the share, there are evidently opposing forces that modulate share prices for companies in the SP500.
>I've been looking for a way to diversify into companies that actually have solid earnings.
No one has more solid earnings than the top tech companies. Assuming you don't work for Tesla, you already are doing about the best you can in the US. Your options to diversify is to invest in other countries, develop your political connections, and possibly get into real estate development. Maybe have a bunch of kids.
> The sum of the most recent four consecutive quarters’ Generally Accepted Accounting Principles (GAAP) earnings (net income excluding discontinued operations) should be positive as should the most recent quarter.
