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Musk tried mightily to get S&P to change their 12 month rule to 15 days but they refused. Nasdaq, however, caved to Musk and agreed to change the rules of its I

by keernan 3mo ago

Musk tried mightily to get S&P to change their 12 month rule to 15 days but they refused. Nasdaq, however, caved to Musk and agreed to change the rules of its Index - from a 12 months wait to 15 days - in exchange for Musk agreeing to list SpaceX on Nasdaq's exchange. There are ETFs that were issued tied to the Nasdaq 100 which are therefore legally bound to buy SpaceX. But the biggest immorality is the SEC allowing Musk's attempt to manipulate the market by: 1. Setting an IPO price for SpaceX (which absorbed xAi and its money guzzling losses) at unsustainable, incredibly inflated prices; and then 2. Putting incredible pressure on SP500 and other index makers to change their rules to force the purchase of SpaceX at those sky high prices (in an IPO, company gets to set the IPO price). It's legal. At least in the eyes of the SEC which, of course, is an institution that is controlled by the wealthiest who control the markets, so of course it's legal. But it is outrageous market manipulation that is fraudulent in its intent to enrich the wealthiest man on earth at the expense of ever wage earner putting her money into Index Funds. Thank goodness the S&P and CRSP refused to change their rules. Otherwise the shifting of risk from Musk onto the shoulders of every working American would have been complete.

nradov 3mo ago
I don't understand your comment. The SEC doesn't control IPO prices. No one was forced to buy $SPCX at the IPO price.
- keernan 3mo ago
  If Musk's pressure had succeeded and the S&P and CRSP had changed their index rules, then the major indexes would have been legally obligated to buy SpaceX at the IPO price - or presumably higher because their own mass purchases would have driven the price even higher. That was Musk's plan. It failed because he couldn't get the major indexes to cow tail to his pressure and demands. Edit: My reference to the SEC is that they are charged with investigating market manipulation. And Musk was involved in the biggest attempt at market manipulation probably in history - trying to pressure private indexes used by almost every ETF in the world (S&P and CRSP) to change their rules which would have legally obligated those ETFs to purchase SpaceX within 15 days. However, the SEC cannot investigate it because no laws would be violated despite the fact it would have been an incredible market manipulation. In fact, the change in rules by Nasdaq 100 is a huge market manipulation that has taken place exactly as I describe - it's simply not as catastrophically large as it would have been had all the major indexes succumbed to Musk's demands.
  - nradov 3mo ago
    You seem to be confused about how index funds work. Hypothetically even if $SPCX was added to the S&P500, funds that track that index wouldn't be legally required to purchase it at the IPO price. Have you ever even read a fund prospectus or do you believe the uninformed nonsense you read online? The way it actually works is that when a stock is added to an index the index funds gradually build a position using a series of trades over time.
    - keernan 3mo ago
      Mutual funds and ETFs set forth a prospectus that is a legal document binding them by law to comply with how they operate. While an etf is free to create its own index, that is not the way the market works. Vanguard, Fidelity, iShares, BlackRock and the other major players, state in their prospectus what index the ETF will follow - such as the CRSP US Total Market Index to use one example from Vanguard's VTI etf. That means Vanguard VTI tracks the stocks that are contained in the CRSP US Total Market Index. So, if CRSP adds a new holding to its US Total Market Index, Vanguard VTI is legally bound by its prospectus to add that stock to VTI and to do so in a manner that assures VTI returns track the CRSP US Total Market Index returns as closely as possible (meaning they own every stock CRSP does and in the same proportion that CRSP does). This is not just a 'good idea'. It is legally binding upon Vanguard by virtue of the VTI prospectus.
      - mattmaroon 3mo ago
        The way you don’t actually address the points people make or even seem to understand them, but rather just keep restating what was already said, makes you a pretty good proxy for the exact view I was talking about, so thanks!
      - nradov 3mo ago
        It's always disappointing to see that level of aggressive ignorance on HN. You completely missed the point. The fund is legally bound to make a good faith effort to track a target index, not to immediately buy every stock the day it's added to the index.
keernan 3mo ago
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by keernan 3mo ago

nradov 3mo ago

I don't understand your comment. The SEC doesn't control IPO prices. No one was forced to buy $SPCX at the IPO price.

keernan 3mo ago
If Musk's pressure had succeeded and the S&P and CRSP had changed their index rules, then the major indexes would have been legally obligated to buy SpaceX at the IPO price - or presumably higher because their own mass purchases would have driven the price even higher. That was Musk's plan. It failed because he couldn't get the major indexes to cow tail to his pressure and demands. Edit: My reference to the SEC is that they are charged with investigating market manipulation. And Musk was involved in the biggest attempt at market manipulation probably in history - trying to pressure private indexes used by almost every ETF in the world (S&P and CRSP) to change their rules which would have legally obligated those ETFs to purchase SpaceX within 15 days. However, the SEC cannot investigate it because no laws would be violated despite the fact it would have been an incredible market manipulation. In fact, the change in rules by Nasdaq 100 is a huge market manipulation that has taken place exactly as I describe - it's simply not as catastrophically large as it would have been had all the major indexes succumbed to Musk's demands.
- nradov 3mo ago
  You seem to be confused about how index funds work. Hypothetically even if $SPCX was added to the S&P500, funds that track that index wouldn't be legally required to purchase it at the IPO price. Have you ever even read a fund prospectus or do you believe the uninformed nonsense you read online? The way it actually works is that when a stock is added to an index the index funds gradually build a position using a series of trades over time.
  - keernan 3mo ago
    Mutual funds and ETFs set forth a prospectus that is a legal document binding them by law to comply with how they operate. While an etf is free to create its own index, that is not the way the market works. Vanguard, Fidelity, iShares, BlackRock and the other major players, state in their prospectus what index the ETF will follow - such as the CRSP US Total Market Index to use one example from Vanguard's VTI etf. That means Vanguard VTI tracks the stocks that are contained in the CRSP US Total Market Index. So, if CRSP adds a new holding to its US Total Market Index, Vanguard VTI is legally bound by its prospectus to add that stock to VTI and to do so in a manner that assures VTI returns track the CRSP US Total Market Index returns as closely as possible (meaning they own every stock CRSP does and in the same proportion that CRSP does). This is not just a 'good idea'. It is legally binding upon Vanguard by virtue of the VTI prospectus.
    - mattmaroon 3mo ago
      The way you don’t actually address the points people make or even seem to understand them, but rather just keep restating what was already said, makes you a pretty good proxy for the exact view I was talking about, so thanks!
    - nradov 3mo ago
      It's always disappointing to see that level of aggressive ignorance on HN. You completely missed the point. The fund is legally bound to make a good faith effort to track a target index, not to immediately buy every stock the day it's added to the index.

keernan 3mo ago

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