The Year of the Mega IPO: What Investors Should Know

There are three potential IPOs this year that have the world abuzz. SpaceX, Anthropic and OpenAI have all signaled desire to go public in 2026. As of today, only SpaceX has filed any public documents, with a plan to hold its IPO on June 12, 2026. Anthropic and OpenAI have made confidential filings with the SEC, with Anthropic’s IPO most likely to happen around October of 2026, and OpenAI’s timing still to be confirmed.

What’s special about these companies? Their scale. SpaceX is targeting a valuation of $1.75 trillion, and OpenAI and Anthropic both carry private valuations in the neighborhood of $1 trillion. Any one of the three could easily be the largest IPO ever. Despite their size, none of the three are profitable—at least so far (although Anthropic is reportedly on track for its first profitable quarter).

Given that scale, these companies are likely to be added to major stock indices relatively quickly after going public, which has raised questions about what that means for index investors. Specifically, some have asked whether adding newly public, high-growth focused companies that are still investing heavily in scaling their businesses could introduce risk to portfolios. In this post we’ll explain how index inclusion works for newly public companies, how it could affect your investments, and why index investors probably don’t need to be overly concerned about this wave of mega IPOs.

Before we get into the details, it’s helpful to remember that Wealthfront offers direct indexing products tracking three major indices that could hold any of the companies mentioned above after they go public:

• CRSP US Total Market Index: Used in our US Direct Indexing (USDI) strategy available in Automated Investing accounts with a balance over $100,000, this index contains large, medium, and small US stocks covering about 98% of the total US equity market.

• S&P 500® Index: This index contains about 500 of the largest US companies and covers about 80% of the total US market.

• Nasdaq-100 Index®: This index contains about 100 of the largest non-financial companies listed on the Nasdaq exchange.

In addition to these strategies, Wealthfront supports investments in a variety of ETFs that could hold the stocks as well.

How stock index eligibility & weighting typically works

When building a stock index, there are two main considerations: Which stocks should be eligible for inclusion in the index, and how much weight each eligible stock should have in the index. Many indices, including all three used in Wealthfront’s Direct Indexing products, determine weighting (and sometimes eligibility) based on market capitalization—but not all market cap measures are the same.

To explain, we need to introduce the concept of free float. The market capitalization of a company is equal to the price of each share multiplied by the total number of shares outstanding. However, just because a share exists doesn’t mean it’s traded. Some shares may be owned by the company itself, for instance. Free float measures the number of shares that are available to be publicly traded, and free float market capitalization is the number of free-floating shares multiplied by the price of each share. This quantity is strictly smaller than the company’s full market capitalization, and in some cases considerably smaller.

Two illustrative examples on both sides of the free-float percentage spectrum: IBM, a classic blue-chip stock, has 939.9 million shares outstanding, and 937.9 million, or about 99.8%, of those shares are publicly traded. On the other hand, recently IPO’d Figma has 445.7 million shares outstanding, but only 224.1 million are traded. Its free-float percentage is just over 50%.

How recent methodology changes are shaping index construction

Why does free float matter? It’s likely that all three IPOs will be what’s called “low float”: only a small percentage of the overall value of the company will be allowed to trade publicly, while the vast majority is kept untraded. SpaceX plans to sell about $80 billion worth of stock at a valuation of around $1.75 trillion, implying a free float percentage of only 4.57%.

Until recently, all three indices had rules requiring a free float percentage of at least 10%, which would exclude SpaceX. However, both Nasdaq and CRSP have made changes to their index inclusion rules that affect the Nasdaq-100® and the CRSP US Total Market Indices, respectively. Let’s start with Nasdaq’s changes:

• Fast Entry: For the very largest new listings, those that rank within the top 40 of current Nasdaq‑100 constituents by Full Market Capitalization, there is a new Fast Entry pathway. These companies are evaluated on their seventh trading day and, if eligible, added shortly thereafter, with all existing liquidity requirements still applying. The quarterly rebalance handles the broader population of eligible companies; Fast Entry ensures the index can respond in a timely way when a company of significant scale enters the public market.
  
• Low float: Nasdaq introduced an additional capping mechanism that limits the initial weight of lower float securities up to 33 1/3% float. The low-float treatment ensures that design of the Nasdaq-100 stays investable: large IPOs enter at a weight grounded in available shares, and scale up as float expands. Other, higher-float stocks will continue to be weighted based on their full market cap.

CRSP has relaxed a rule that required at least 10% free float for a large IPO. A new rule makes a stock eligible if its free-float market capitalization is at least 0.005% of the total free-float capitalization of the entire set of index-eligible stocks, which we expect SpaceX will satisfy. If it does, CRSP’s IPO rules state that SpaceX will be added to the CRSP US Total Market Index five trading days after the IPO.

These changes mean that a very large company floating a small percentage of its stock could be eligible for index membership, and eligible more quickly than before. What they don’t mean is that such a stock would occupy a large fraction of the index’s weight, solely due to its enormous size.

• In the case of the Nasdaq-100®: If SpaceX sells $80 billion in stock at a market cap of $1.75 trillion, its weight in the index would be based on a value of $240 billion ($80 billion x 3). This would place it slightly below the market cap of Shopify (about $260 billion), which has an index weight of 0.64% as of June 1 and a free-float percentage of about 94%. While this weight isn’t negligible, it’s significantly less than the weight implied by the full $1.75 trillion. As a reference, Amazon’s market cap as of June 1 is about $1.88 trillion, and it has a free-float percentage of about 91% and a weight of 4.62% in the Nasdaq-100®.

• The CRSP Total Market Index is free-float weighted, so SpaceX’s weight would be based on the $80 billion value. This would place SpaceX just below UPS, which has an index weight of about 0.12% as of June 1.

We should note that free float includes the effect of “lockups”, which often prevent pre-IPO investors from selling for about six months after an IPO. When the lockup expires, all of the “locked up” shares can be freely traded, which can cause an increase in the free-float percentage. SpaceX’s lockup provisions allow varying percentages of locked-up stock to be sold after the first and second public earnings release, as well as a series of milestone dates from 70 to 180 days after the IPO. All of these events will increase the free-float percentage of SpaceX, and its weight in any indices it is a member of (for the Nasdaq-100®, SpaceX’s weight will only increase as long as its free float percentage is below 33.3%).

S&P® recently confirmed that their eligibility rules will not change, and low-float IPOs will remain ineligible for these indices. In addition to the float requirement, S&P® requires positive net earnings in the most recent quarter and over the trailing year, which excludes unprofitable firms, and a twelve-month “seasoning” requirement.

How expected IPOs could impact Wealthfront portfolios

We generally expect any fund tracking an index to buy the stocks in the index it tracks as they are added (maintaining performance close to the underlying index is a primary concern for index funds). As we have mentioned, each index has its own rules for eligibility. Whether or not, or how quickly, SpaceX (or, again, any other stock) is added to a given index depends on that index’s rules.

Direct Indexing: Clients with USDI, Nasdaq-100 Direct, or S&P 500 Direct will see their accounts purchase the stocks of these potential new IPOs (or any other stock) if they enter the indices being tracked. Importantly, in most cases we will not realize gains in other stocks in order to do so. Purchases of the new IPOs are designed to be done tax efficiently using cash from deposits, dividends, or tax-loss harvesting, which is how our Direct Indexing strategies treat all new stock additions to these indices.

Clients who don’t want to hold a particular stock in their Direct Indexing portfolios can put it on their restricted list. Wealthfront attempts to get IPO stocks into our systems as soon as possible (and SpaceX is already in our system), so you have plenty of time to add them to your restricted list, if you care to.

• Important note: Wealthfront won’t buy or sell restricted stock. Adding a stock to your restricted list after it’s already in your portfolio means our software won’t buy more, but it won’t sell what you already hold.

Automated Investing Account: The two main US stock ETFs in Wealthfront’s recommended portfolio allocations (VTI and ITOT) track indices from CRSP and S&P®, respectively. VTI tracks the CRSP US Total Market Index, the same index used by Wealthfront’s USDI. ITOT tracks the S&P Total Market Index, which will keep a free-float requirement of at least 10%, but does not have the same financial viability or trading history requirements as the S&P 500®. It’s important to note that both indices determine weighting using free-float market capitalization.

Clients can also customize their Automated Investing Account by choosing from over 200 ETFs, many of which are index-based. For example, the QQQM and QQQ ETFs track the Nasdaq-100 Index®, and we expect that these funds will purchase SpaceX when it’s added to the index (as we would expect for any stock).

Stock Investing Account: SpaceX stock should be available for purchase the first trading day after listing, and we expect the same availability for Anthropic and OpenAI should they IPO. The above-mentioned ETFs are also available for purchase directly in the Stock Investing Account.

Takeaways for mega-IPO pessimists (and optimists)

There are some potentially historically large IPOs expected in 2026. But the effect on equity indices isn’t as big as some articles might lead you to believe, and these stocks may not even be eligible for many indices for quite some time. Our advice to index investors: don’t let the headlines prevent you from continuing with your investing strategy. These IPOs will not change the long-term benefits of index funds, and if they are added to the indices, your portfolio will remain diversified across a large number of stocks in the index.

This post has focused on fears about overexposure to these IPOs, but we know that’s not the only perspective. For investors planning to directly purchase stock in these upcoming IPOs (or any other IPO), it’s important to remember that the stocks of recently public companies are often volatile. We believe single-stock bets should be one small part of a broader diversified portfolio, and that investors are better off investing in a diversified portfolio of index funds than trying to predict the future trajectory of one (or any) large, buzzy IPOs.