In my opinion, SpaceX is the death knell passive investing. Not because it is a bad business, but because it could be an extraordinary business taken public at an absurd price (billions in losses, 100x sales!).
Space will IPO at a potential $1.75 trillion to $2 trillion valuation, but with only 3% to 4% of shares floating publicly. That means a tiny supply of shares could meet massive demand from retail investors, institutions, and eventually passive funds.
As SpaceX is added quickly to major indices like the Nasdaq-100 or S&P 500, passive funds will not ask whether the valuation makes sense. Their mandate is to track the index. So ETFs, index funds, target-date funds, and retirement accounts would have to buy SpaceX simply because it is included.
This creates a feedback loop. The valuation is high, so the market cap is huge. The market cap is huge, so the index weight matters. The index weight matters, so passive funds buy. Passive funds buy, the price rises, and the valuation gets validated by mechanical demand rather than fundamentals.
Basically, mechanical momentum dressed up as diversification. In that scenario, ordinary retirement savers become exit liquidity for early pr
