Did SpaceX’s giant IPO drain U.S. stock market liquidity? Calculations say it was just a false alarm—however, the actual buy orders from index funds were only $30 billion.

According to Beating Monitoring, in the face of IPOs from super giants like SpaceX, Anthropic, and OpenAI with valuations exceeding $4 trillion, the U.S. stock market is falling into a serious panic over liquidity drying up. In response to market concerns about liquidity, Rob Arnott, chairman of RAFI Index Company, pointed out in an article that the actual index rules will serve as a critical "firewall," preventing the market from collapsing due to passive fund concentrated buying.

Arnott noted in extreme scenario stress tests that if SpaceX goes public with a $2 trillion valuation and only 4% (i.e., $80 billion) of its shares are available to the public, then if the index committee immediately includes SpaceX based on its total market value weight, the $18 trillion fund tracking major U.S. indices would be forced to buy over $500 billion worth of stock, far exceeding the actual available float of $80 billion. Such extreme concentration could theoretically push the stock price to infinity and even cause the U.S. stock market to freeze. However, actual rules turn this potential collapse into a false alarm; the float-adjusted mechanism used by major indices caps the maximum buying limit of index funds at around $30 billion. Although a withdrawal of $30 billion could still trigger intense market turbulence, it would not cause a market crash.

Arnott warned that the real pain point brought by super IPOs is not a temporary liquidity shock, but the distorted valuation system caused by passive index funds. Since 2012, the performance of S&P 500 constituents has wildly outpaced mid-cap stocks (Next 500), widening the valuation premium between the two to nearly 80%. However, from a fundamental perspective, over the past 25 years, the cash flow growth rate of S&P 500 giants has actually lagged behind the runner-up group by 3%. This indicates that the prosperity of large-cap stocks is almost entirely driven by bubble-supported premiums rather than fundamentals. Once passive funds are forced to buy high to allocate to SpaceX, it will only make this fractured valuation bubble more irreparable. Companies outside the index, which have solid fundamentals, are the true long-term winners who will ultimately prevail.