SpaceX won't get early access to the S&P 500

Your pension plan may not be forced to buy SpaceX stock after all.

With SpaceX about to go public shortly at a gobsmacking valuation, the Nasdaq 100 and other indexes recently relaxed their rules to allow Elon Musk's company to join early. That caused some consternation because huge funds often invest in ETFs (exchange traded funds) based on those indexes. That in turn means that people could end up with SpaceX stock in their pension funds, for instance, whether they want it or not.

However, the largest index in the world, the S&P 500, just announced that it won't relax its rules for so-called MegaCap companies to let them in early. As a result, SpaceX will have to wait at least 12 months before being considered for addition to the index. What's more, firms must be profitable over a period of their four most recent quarters for inclusion. That could be a challenge for SpaceX as it has never actually turned a profit, according to its own S-1 SEC filing.

At a time when financial rules are relaxing to favor corporations, the news seemed to catch observers off guard. "I am genuinely surprised," said Bloomberg Intelligence analyst James Seyffart. "But S&P is the market leader and they can buck the trend."

Analysts have been cautious about SpaceX, with many considering its potential $1.78 trillion market cap excessive. Research firm Morningstar called the company "significantly overvalued," rating its true valuation at $780 billion and saying the IPO "does not offer the best entry point for retail investors." Analysts see xAI as a potential anchor on the profitable divisions like Starlink due to heavy competition from OpenAI, Gemini and Anthropic.

The S&P's decision may not let your pension off the hook altogether, though. Other indexes including the Nasdaq 100 and FTSE Russell have already changed their rules to allow SpaceX to join in just 15 and five trading days, respectively. Critics have argued that this "fast entry" will benefit early investors and hurt regular retail buyers.