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Is this part of the business model of these large, unprofitable VC-backed companies? Build a valuation to meet the 8.1bn threshold, then sell the shares to pass

Is this part of the business model of these large, unprofitable VC-backed companies? Build a valuation to meet the 8.1bn threshold, then sell the shares to passive investors in S&P 500 index funds?

deleted 7y ago
[deleted]
hef19898 7y ago
And for VC's to build a story and evaluation interesting enough for SoftBank to buy in? Because it sometimes seems like it...
mruts 7y ago
No. The S&P 500 is selected by committe. And it's 6.1bn, not 8.1bn. Mabye that's the plan for the Russell 3000, though. But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.
- kgwgk 7y ago
  > But it doesn't really matter except when the stock gets added to the index It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
- rwmurrayVT 7y ago
  Not true. [0] >...Unadjusted company market capitalizations of US$8.2 billion or more for the S&P 500..... are required. [0] https://us.spindices.com/documents/methodologies/methodology-sp-us-indices.pdf https://us.spindices.com/documents/methodologies/methodology...
  - mruts 7y ago
    Hmm. I guess it just changed this year. My bad!
    - rwmurrayVT 7y ago
      I saw $6.1b first as a Google given answer. It said different on Wikipedia so I investigated the source. I knew my high school teachers were wrong about Wikipedia!

Is this part of the business model of these large, unprofitable VC-backed companies? Build a valuation to meet the 8.1bn threshold, then sell the shares to passive investors in S&P 500 index funds?

deleted 7y ago

[deleted]

hef19898 7y ago

And for VC's to build a story and evaluation interesting enough for SoftBank to buy in? Because it sometimes seems like it...

mruts 7y ago

No. The S&P 500 is selected by committe. And it's 6.1bn, not 8.1bn. Mabye that's the plan for the Russell 3000, though. But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.

kgwgk 7y ago
> But it doesn't really matter except when the stock gets added to the index It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
rwmurrayVT 7y ago
Not true. [0] >...Unadjusted company market capitalizations of US$8.2 billion or more for the S&P 500..... are required. [0] https://us.spindices.com/documents/methodologies/methodology-sp-us-indices.pdf https://us.spindices.com/documents/methodologies/methodology...
- mruts 7y ago
  Hmm. I guess it just changed this year. My bad!
  - rwmurrayVT 7y ago
    I saw $6.1b first as a Google given answer. It said different on Wikipedia so I investigated the source. I knew my high school teachers were wrong about Wikipedia!