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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 t

by keernan 4mo 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 4mo 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 4mo 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 4mo 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 4mo 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 4mo ago
      It would be helpful if you could provide a source supporting your thought that an ETF following a particular index would buy stock in the new company over what you describe as an extended period of time - as opposed to within a short few days. I spent quite a lot of time before the SpaceX IPO learning how a change in Nasdaq 100 rules regarding adding a new company to its index, would impact ETFs whose prospectus tied them to the Nasdaq 100. The information I reviewed indicated the ETFs would add all of the new purchases immediately (within a matter of days following the addition of a new company to the tracking index).
    - keernan 4mo ago
      >aggressive ignorance on HN That's rich in view of the fact you are the one who is expressing aggressive ignorance. The truth is: 1. An ETF tracking a specific passive index is legally obligated to purchase the shares of a new company added to that index with zero discretion allowed no matter how irrational the pricing might be. 2. Contrary to what you've been spewing about ETFs adding the stock gradually over time, the truth is all ETFs make their full purchases BEFORE the company is actually even added. Doubt it? Do a quick google search: How soon do ETF's tracking a specific index buy the stock in a new company added to the index they track? So stop being a jerk with your personal attacks - especially when you don't know what you are talking about.
overlord1109 4mo ago
> CRSP had changed their index rules CRSP did change their rule earlier in Feb, where they added a clause that later allowed SPCX to be included, despite having <10% float. Source: https://www.crsp.org/crsp-market-indexes-changes-to-float-shares-investability-screen/ https://www.crsp.org/crsp-market-indexes-changes-to-float-sh...
tialaramex 4mo ago
> cow tail to his pressure and demands. The idea you wanted is "kowtow" not "cow tail". The "kowtow" is a Chinese gesture of submission to power, in practice it might be a large formal gesture like European bowing, but it can be something much more subtle, like the knuckle tap in the tea ceremony, the observer knows what is signified. The submission to power rather than a particular gesture is what's retained in English. "Cow tail" does exist as an actual idea in baseball, as a particular type of long swing which is said to resemble how cows twitch their tails but here that doesn't make sense.

by keernan 4mo ago

nradov 4mo 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 4mo 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 4mo 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 4mo 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 4mo ago
    It would be helpful if you could provide a source supporting your thought that an ETF following a particular index would buy stock in the new company over what you describe as an extended period of time - as opposed to within a short few days. I spent quite a lot of time before the SpaceX IPO learning how a change in Nasdaq 100 rules regarding adding a new company to its index, would impact ETFs whose prospectus tied them to the Nasdaq 100. The information I reviewed indicated the ETFs would add all of the new purchases immediately (within a matter of days following the addition of a new company to the tracking index).
  - keernan 4mo ago
    >aggressive ignorance on HN That's rich in view of the fact you are the one who is expressing aggressive ignorance. The truth is: 1. An ETF tracking a specific passive index is legally obligated to purchase the shares of a new company added to that index with zero discretion allowed no matter how irrational the pricing might be. 2. Contrary to what you've been spewing about ETFs adding the stock gradually over time, the truth is all ETFs make their full purchases BEFORE the company is actually even added. Doubt it? Do a quick google search: How soon do ETF's tracking a specific index buy the stock in a new company added to the index they track? So stop being a jerk with your personal attacks - especially when you don't know what you are talking about.

overlord1109 4mo ago

> CRSP had changed their index rules CRSP did change their rule earlier in Feb, where they added a clause that later allowed SPCX to be included, despite having <10% float. Source: https://www.crsp.org/crsp-market-indexes-changes-to-float-shares-investability-screen/ https://www.crsp.org/crsp-market-indexes-changes-to-float-sh...

tialaramex 4mo ago

> cow tail to his pressure and demands. The idea you wanted is "kowtow" not "cow tail". The "kowtow" is a Chinese gesture of submission to power, in practice it might be a large formal gesture like European bowing, but it can be something much more subtle, like the knuckle tap in the tea ceremony, the observer knows what is signified. The submission to power rather than a particular gesture is what's retained in English. "Cow tail" does exist as an actual idea in baseball, as a particular type of long swing which is said to resemble how cows twitch their tails but here that doesn't make sense.