SpaceX shares could get a boost from Nasdaq 100 rebalancing

SpaceX's stock has been trading within a narrow range recently, but a potential boost may be on the horizon following the Nasdaq 100 Index's quarterly rebalancing later this month. The reason behind this possibility lies in a lesser-known rule of the tech-dominated benchmark and the staggered release of shares from lockup periods for SpaceX shareholders.

Nasdaq determines a company's weight in the index by calculating its market value, considering either its outstanding shares or 3-times its free-floating shares, whichever amount is smaller. Due to SpaceX's limited free float, resulting from insider and lockup restrictions, the company currently holds a 1.25% weighting in the Nasdaq 100 Index, ranking it 19th among its constituents. Notably, SpaceX boasts the sixth-largest market capitalization in the index, surpassing $2 trillion.

However, this weight is anticipated to increase after the index's upcoming rebalancing, scheduled for announcement on Friday and effective on September 21. This anticipated rise in SpaceX's weight is attributed to the fact that over one billion shares have been released from lock-up restrictions, elevating its free float to roughly 30% of the company's outstanding shares, up from less than 10% following its IPO.

As per JPMorgan Securities strategists led by Min Moon, SpaceX's weight could reach 1.51% post-rebalancing, triggering $12.4 billion of net passive investments from index funds and ETFs.

Given that $1.7 trillion in assets currently track the Nasdaq 100 Index, SpaceX's potential increased weight could significantly impact the market. SpaceX shares experienced a slight decline of about 1% in early trading on Tuesday, with analysts suggesting that the market's reaction will be driven by forced buying to some extent. Ed O Gorman, CEO of River Wealth Advisors, stated that it will take time to gauge the market's true sentiment regarding the stock.