Despite playing a major role in the markets and the minds of investors following its historic initial public offering, SpaceX still comprises a relatively small portion of the Morningstar US Total Market Index. In fact, the company had a smaller impact on index turnover than anticipated in the most recent Morningstar Market Indexes quarterly reconstitution, according to new insights from Morningstar Indexes.
While SpaceX’s total market capitalization stood at just under $2 trillion on September 4, “ranking day” for the quarterly reconstitution of the Morningstar Market Indexes, its weight within the Morningstar US Total Market Index was just 0.1%. Although Morningstar's fast-track IPO methodology enabled investors to gain exposure shortly after its June public debut, the index's free float methodology ensures that constituent weights, which were refreshed at September reconstitution, continue to reflect their "free float,” or the shares available publicly to investors.
Alexander Poukchanski, director of index analytics at Morningstar Indexes, said: “The role of a market benchmark is to accurately reflect the current composition of the investable market. The Morningstar Market Indexes achieve this through the timely inclusion of major IPOs and by weighting index constituents by their float-adjusted market capitalization. And by using total market capitalization to assign companies to market segments, our quarterly reconstitution accurately reflects the impact of mega-IPOs like SpaceX on broad market concentration.”
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