Key Points
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Since its initial public offering, SpaceX has become one of the 10 largest companies in the world.
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Because the Nasdaq-100 is weighted by free-float market cap, SpaceX’s allocation to the index will be much smaller than its size would suggest.
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Right now, SpaceX isn’t even in the index’s top 20 holdings. Its current weight is 1.25%.
- 10 stocks we like better than Space Exploration Technologies ›
Space Exploration Technologies (NASDAQ: SPCX) joined the Nasdaq-100 index on July 7. If you own the Invesco QQQ ETF (NASDAQ: QQQ) or the Invesco Nasdaq 100 ETF (NASDAQ: QQQM), you now own a piece of it too.
SpaceX has gotten a lot of attention since its initial public offering (IPO). But now that it’s getting added to major market indexes, the most important step is assessing its impact.
What might surprise many people is that, despite its massive $2 trillion market cap, the stock isn’t nearly as influential in the Nasdaq-100 as you might think. And that’s perhaps the biggest takeaway from this story.
SpaceX isn’t even a top-20 holding in the Nasdaq-100
The reason SpaceX has only a relatively minor influence on the index is the distinction between total market capitalization and free-float market capitalization.
Free-float market cap takes into account only the shares that are publicly available. For SpaceX, that’s about 5% of the total shares available. Most companies only have a percentage of their total shares publicly tradable, but SpaceX has less than average.
By total market cap, SpaceX would rank as one of the 10 largest companies in the world. But because the Nasdaq-100 uses free-float market cap, it’s only the 21st-largest holding in the index, between KLA and Texas Instruments. Its weight is 1.25%.
SpaceX won’t have a meaningful impact on the Nasdaq-100
If you’re buying either the Invesco QQQ ETF or the Invesco Nasdaq 100 ETF expecting a significant stake in SpaceX, you’re probably going to be disappointed.
Even a major rally or crash in the stock market likely won’t be felt in the index. The one thing to potentially be mindful of is the volatility of the stock. The IPO price was set at $135. It initially traded at around $150 when it went public, reached as high as $225, and is now back down to around $149.
There’s a lot of noise in the trading behavior of this stock. From investors trying to get their hands on shares for the first time to the fund industry buying millions of shares to track their underlying indexes, volatility in SpaceX could be higher than average for a while until things settle a bit.
The next big milestone will be next summer when the stock becomes eligible for inclusion in the S&P 500 (SNPINDEX: ^GSPC). While there will be another wave of buying if and when that happens, expectations should be tempered on that day as well. The S&P 500 is also free-float, market-cap-weighted, and might receive an even smaller allocation there.
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David Dierking has positions in Invesco NASDAQ 100 ETF. The Motley Fool has positions in and recommends KLA and Texas Instruments. The Motley Fool has a disclosure policy.
