Benjamin Felix

You can see that, but it actually affects the structure of IPO deals.

It's just crazy, these sort of second order effects of the growth of index funds.

Which is crazy.

A big part of this topic and why it's so interesting is that there's been some speculation that, as I mentioned to S&P, and we know NASDAQ did change their rules.

There are two ways you can interpret that.

One way is that it's nefarious, in the case of NASDAQ at least, that they're changing their index rules so that their funds tracking their index, like the NASDAQ 100, will buy SpaceX stock.

And that they're doing that to curry favor with Musk to get SpaceX to list on their exchange.

So that's the sort of bad intent view.

The noble intent view is that, well, these are massive companies.

And again, why do indexes exist?

To represent the market.

Of course you want to have a massive company that has listed on the market, included in your index as soon as possible.

So that's the noble intent view.

Anyway.

VTI, which is the massive $2 trillion index fund that I mentioned earlier, that's a Vanguard US total market fund, it tracks the CRISP US total market index.

Now, CRISP is another index that adds eligible securities to the index within as few as five days for fast track entry.

Marco Salmon and his co-author in this paper show that the

Expected index investor demand for IPO shares causes fast track IPOs to outperform their non-fast track counterparts by over five percentage points following their listing.

So they list, they pop as tends to happen.

So their price increases relative to their listing price, but the fast track inclusion stocks pop more.