By Bill Alpert

Nasdaq's new rules for adding stocks to its Nasdaq 100 Index give the exchange an edge against rival NYSE in the competition to list the hot offerings of SpaceX, OpenAI and Anthropic. The rules could also prove a windfall for anyone who likes to flip initial public offerings.

On Monday, Nasdaq said that on May 1 it will change the membership rules for its index of the top 100 Nasdaq stocks -- which serves as the benchmark for over $1 trillion in index funds, such as the big Invesco QQQ Trust exchange-traded funds.

The new rules could fast track the entry of a newly public large company -- let's just say, a company like SpaceX, OpenAI, or Anthropic -- 15 days after its IPO. Current rules might leave investors waiting a year before such a big company would show up in the Nasdaq 100.

The rules would also eliminate the index's requirement that a minimum of 10% of a member company's issued shares be free-trading. SpaceX filed confidentially on Wednesday for an IPO that may float as little as 3% of its stock when it debuts in June. Now, that won't keep it out of the Nasdaq 100.

What's more, Nasdaq will multiply that percentage float by three-times, in calculating the weight of a low-float addition to the index. That adjustment increases the amount that Nasdaq 100 index funds must buy when they add the new issue to their holdings, after the 15th day of trading.

IPO experts say the Nasdaq 100's fast-entry and extra weighting could add up to a supply-demand imbalance when a low-float new issue gets bought by every Nasdaq 100 fund and the many big institutions whose holdings track index weightings.

"This is likely to lead to a predictable price spike on the 15th day of trading," says Chris Murray, the head of trading at financial firm Jiko, who is a longtime Wall Street quantitative strategist and finance researcher. "You get a massive surge in demand without a corresponding increase in the supply of available shares."

With Harvard Business School professor Marco Sammon, Murray studied a fast tracking rule adopted by the Center for Research in Security Prices for its CRSP indexes, which are tracked by $3 trillion in assets. CRSP adds new issues after just five days, but does require a 10% free-trading float. The researchers estimate that index fund demand generated by fast-tracking an IPO to an index could allow the stock's issuer to raise 6% more capital than a non-fast-tracked stock.

The inclusion date for new issues in the Nasdaq 100 will be "front-runnable" by hedge funds and anyone wanting to capture a quick profit, Murray says. On Day 15, index funds (and their investors) will end up buying at an artificially high price, paying a "shadow tax" that the researchers estimate could amount to billions of dollars.

In the case of SpaceX, this flipping strategy may not be restricted to well-connected hedge funds. Reports have said that the company may let retail investors buy up to 30% of its IPO.

Worries that index demand will exceed the available float for such new issues stem from "misunderstanding and confusion," says Nasdaq in a memo accompanying Monday's announcement. While rival indexes like the S&P 500 weight stocks according to their float, the Nasdaq 100 has historically weighted stocks by their full market capitalization (that is, by all shares outstanding).

Nasdaq calls its new float-weighting exception a conservative balance. The giant market cap of a SpaceX wouldn't quickly swamp the index, yet a three-times weighting for a small initial float will smoothly increase over time, as the float rises toward 33.3% -- at which point its weight will correspond to its market cap.

"We believe our latest enhancements will continue to ensure that the Nasdaq-100 Index remains timely and representative of the market it measures, while preserving replicability for passive managers and investors," said Nasdaq, when Barron's asked about the new rules.

Nasdaq doesn't believe that index buying will create a price-spiking demand shock.

If a big new issuer with a trillion dollar market cap offers 6% of its shares in an IPO, or $60 billion, Nasdaq says the stock's index weight would be $180 billion (that is, three-times $60 billion). That is less than 1% of the Nasdaq 100. If $600 billion in funds track the index (as Nasdaq estimates) and they invest 1% in the new stock, their buying on Day 15 will be just 10% of the float.

If Sammon and Murray's estimates are right, Nasdaq's new rules could be worth billions of extra dollars to an issuing company and any selling insiders. That is a powerful selling point, as Nasdaq competes behind the scenes with the NYSE for giant listings like SpaceX or OpenAI. The most popular index for big NYSE stocks is the S&P 500. S&P Global Ratings is considering a fast track to the S&P 500, but hasn't yet acted.

Nasdaq has policies that separate its index rule-makers from its listings sales force.

Another longtime observer of IPOs, the University of Florida professor Jay Ritter, also thinks the 15-day fast entry to the Nasdaq 100 will foster a kind of slow-motion flipping.

First day returns will be higher. The index inclusion bump may be smaller, however, if lots of Barron's readers have decided to try slow-motion flipping.

He thinks Nasdaq will win the listings of SpaceX, OpenAI and Anthropic.

Write to Bill Alpert at william.alpert@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 01, 2026 16:34 ET (20:34 GMT)

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