Article written by Jason Choy, InvestNow Senior Portfolio Manager – June 2026

2026 is shaping up to be the year of the mega IPO.

SpaceX has now entered public markets at a valuation approaching $2 trillion USD. Both OpenAI and Anthropic have also confidentially filed paperwork for their own listings this year, which based off their latest private capital raises, would see each flirt with $1 trillion USD valuations.

Taken together, it represents one of the largest waves of new companies entering public markets in history.

The eye-watering valuations and headlines are hard to ignore. These companies are household names, already operating at enormous scale, and sit at the centre of frontier themes like artificial intelligence and space technology, which are expected to shape the next decade.

For New Zealanders investors, the question is – how does this all impact the broader market, and when might these mega-companies start showing up in your KiwiSaver or investment portfolio?

The answer depends on how you invest.

Active managers may choose to participate early in the IPO or wait for more information, depending on how they assess the company’s valuation, financials and long term outlook. If you invest in an actively managed fund, it’s worth understanding your manager’s approach to new listings like these.

For investors in index funds or KiwiSaver funds that track indexes, the process looks different. And it’s that process – and some recent changes to it – that has been driving much of the current discussion.

The IPO: How companies enter the market

An IPO, or initial public offering, is when a private company first makes its shares available for public investors to purchase by listing on a stock exchange.

Companies typically go public in order to access a wider pool of capital, which will be used to fund operations and expand the business. It also provides a liquidity vehicle to any shareholders that want to cash out their investments.

Importantly, when a company goes public, it specifies the percentage of the company’s total shares that will be made available. Typically, only a portion is released to the public market, known as the free float. The rest remains with founders, employees and early investors, often subject to lock up periods.

At the time of the IPO, institutional investors – such as pension funds, investment managers, and family offices – play a key role in determining the initial price and are often allocated shares before public trading begins. Most everyday retail investors only gain access once trading starts on the open market, where the price is then determined by supply and demand.

This is where things can get unpredictable.

Why IPOs can be volatile

IPOs can often experience a period of initial volatility. Early investors may sell, new investors may buy in on the theme, and the market works through what it believes the company is worth.

For businesses like SpaceX, OpenAI and Anthropic, that process can be even more pronounced. These are companies where valuation is based much more on future potential than it is on current earnings. Investors are buying a view on where the company might be in five or ten years’ time. When sentiment changes – even slightly – prices can move quickly.

This can lead to sharper movements in the early stages of trading, as markets wrestle against differing views on the company’s growth prospects.

Why indexes don’t usually include IPOs straight away

Because IPOs can be volatile, most market indexes apply a set of rules before adding newly listed companies.

This ‘eligibility criteria’ typically include:

• A minimum period of public trading, otherwise known as a ‘seasoning period’
• Requirements around minimum liquidity and free float
• In some cases, profitability thresholds

These rules exist to ensure that the index captures an accurate reflection of the investable market, rather than reacting to short-term price movements immediately after listing.

In simple terms, indexes are trying to capture the market as it exists in practice, not just in headline valuations.

Historically, this meant passive investors – those that invest in funds that aim to track an index – would only gain exposure to newly listed companies after a period of time, once trading had stabilised.

What index rules have changed recently – and why it’s getting attention

More recently, some of the market’s largest index providers have updated their eligibility criteria for index inclusion.

Nasdaq has reduced its seasoning period from three months to as little as 15 trading days for large IPOs, while also applying less stringent float requirements.

FTSE Russell has taken a similar approach, allowing index inclusion in as little as 5 trading days in certain cases, down from their typical quarter end (up to 3 months) reconstitution period.

S&P Dow Jones Indices also reviewed similar proposals but ultimately retained its existing framework. That means a company like SpaceX won’t be eligible for the S&P 500 until it has at least 12 months of trading history and meets specific profitability requirements, among other requirements.

In practical terms, this creates very different timelines for when these mega companies may appear in KiwiSaver and investment portfolios:

• FTSE Russell indexes like the FTSE Global All Cap and Russell 1000 indexes could include a large IPO in as little as 5 trading days. This means SpaceX stock could be present in KiwiSaver funds that access the popular Vanguard Total World Stock ETF (VT) from June 2026.
• Nasdaq indexes could include such listings within 15 trading days of the IPO, meaning SpaceX stock could be part of New Zealand’s first dedicated Nasdaq KiwiSaver Fund – the InvestNow Foundation Series Nasdaq-100 Fund – from as early as July 2026.
• S&P Dow Jones Indices maintained its existing rules and 12-month seasoning period, so investors in KiwiSaver funds that track the popular S&P 500 Index won’t get exposure to SpaceX stock until June 2027 at absolute earliest. Realistically, it will likely be a while thereafter too, due to the stringent four consecutive quarters of profitability metrics that the index also applies, which the current loss-making SpaceX is far from meeting.

Because massive companies could be entering indexes much earlier than they would have historically, some have raised concerns that passive investors are being forced into outsized exposure to volatile stocks at exactly the wrong time.

This is the heart of the debate, and has led some investors to consider making changes to their investment approach entirely in an effort to reduce exposure to the potential volatility of newly listed companies.

How much will this actually impact your portfolio?

At first glance, these changes, combined with the scale of these companies, can make it feel like the portfolio impact will be significant.

Trillion dollar valuations naturally draw attention.

But index weightings are not based on headline valuation alone. Most indexes use float-adjusted weighting, meaning a company’s weighting in the index only reflect the shares that are actually publicly available. Shares held by insiders or locked up post-IPO are excluded from the calculation.

An easy way to think about it is this – the company might be enormous, but if only a small portion of it is actually on the shelf to buy, this puts a natural constraint on how much weight it can carry in an index.

For SpaceX, the free float at listing has been relatively low – less than 5 percent of all shares outstanding. That places a natural limitation on its initial index weight.

So while SpaceX is a top 10 company in the world by market cap, it won’t be near a top 10 holding in most major indexes. Instead, its index exposure is more modest and around middle of the pack, with:

• Around 0.5% to 0.7% expected weighting in the tech-heavy Nasdaq 100 index; and
• Around 0.1% in broader total market or global indexes like those tracked by the Vanguard Total World Stock ETF.

In a diversified portfolio, that level of exposure is not insignificant, but it is far from dominant. Even in an extreme scenario where the stock underperformed significantly, the overall impact would be limited.

Over time, that weight may increase as more shares become available and the company matures. By that stage, however, the initial IPO volatility would typically have settled and the company would likely be trading within a more stable market environment.

All of this suggests that while these IPOs can introduce short term volatility, the actual portfolio impact from a single, relatively small index holding is likely to be limited. For that reason, investors should be cautious about making broad changes to their investment approach in response, as the potential risks of shifting away from a well-diversified strategy may outweigh the harm they are trying to avoid.

What hasn’t changed – and the more important investment decision underneath this

This is the part that often gets lost in the debate: for investors following a passive, index-based approach, nothing fundamental has changed.

Indexes have always operated on rules. Those rules determine which companies are included, when they are added, and how much weight they carry. From time to time, index providers adjust those rules as markets evolve and new types of companies emerge.

What hasn’t changed is the principle behind this investment approach – if you are a passive investor, then you are broadly choosing to invest in the market as it exists, not selecting individual companies.

If you decide that you want to avoid exposure to specific companies like SpaceX (or even a group of companies) that is entirely valid, and there are ways to avoid that exposure. Many actively managed funds make deliberate choices about what to include and exclude. Ethically-focused funds also do the same, based on their own exclusions criteria.

There is nothing wrong with that approach.

But it is a different approach.

Choosing to avoid specific companies within an index is an active decision. It means stepping away from a traditional, pure index strategy and moving toward a more selective or customised exposure of what you do and don’t want to own.

That decision is best made deliberately, based on your long-term investment goals, your risk tolerance, and your overall portfolio construction. Making short-term changes in response to headlines – whether to increase a specific company’s exposure or avoid it entirely – can introduce its own set of risks.

Bringing it back to first principles

Large IPOs naturally attract attention. They generate headlines, strong opinions, and no shortage of predictions about what might happen next.

There are real decisions taking place beneath the surface. Active managers will spend time assessing valuation, financials and long-term prospects before deciding whether to invest. Index providers will review their rules and determine how and when these companies are incorporated into their benchmarks.

For investors, though, it helps to step back and separate what’s new from what isn’t.

Markets have always evolved. New companies enter, others fall away, and indexes adjust over time to reflect the investable universe. That process hasn’t changed.

For passive investors, that is the point. A rules-based approach is designed to capture these shifts as they occur, rather than anticipate or react to them.

Yes, different index providers may take slightly different approaches to timing, and that can lead to short-term differences in exposure. But over time, for companies of this size and scale, it becomes increasingly difficult for broad market indexes to exclude them entirely. They will form part of the market that investors are choosing to track.

The more meaningful decision, then, is not whether a company enters an index in five days, 15 days or 12 months. It is whether your investment approach remains aligned with your long-term goals.

For most investors, that hasn’t changed.

Staying informed is important. Understanding how these IPOs work, how index rules are applied, and what drives portfolio exposure is part of being a confident investor.

But it’s equally important to avoid the noise.

Making large, short-term changes to your investment approach in response to headlines or concerns about a single company can introduce risks of its own — particularly if it means stepping away from a well-diversified strategy designed to capture long-term market returns.

Staying consistent with your investment approach, and not being drawn into short-term reactions to headlines or market noise, is investing wisdom that has stood the test of time. For most investors, that doesn’t change because of a single IPO – no matter how large it is.

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