For index fund investors, the long-term implications of the SpaceX initial public offering on June 11 will be greater than its immediate impact.

With an IPO price set at $135, the company overall will be valued at a massive $1.8 trillion. Yet what index fund investors see in their portfolios will be quite different, as the largest-ever IPO will represent only a fraction of the company's total shares currently owned by private investors. The public shares, known as the float, will constitute about 4% of SpaceX -- worth some $75 billion. Most major index funds have float-adjusted portfolio weightings of companies.

Vanguard's index funds, for example, will use SpaceX's $75 billion float, not the $1.8 trillion value, to guide its purchases, says Rodney Comegys, head of global equity at Vanguard Capital Management, which oversees $5 trillion in equity index assets. In the Vanguard Total Stock Market Index fund, for example, "you'll have a modest amount, probably less than 0.20% of SpaceX exposure, after the company becomes public," he says.

Yet index designers are making significant rule changes to benchmarks to accommodate large-scale IPOs like SpaceX. The Nasdaq and FTSE Russell indexes are fast-tracking the inclusion of large IPOs. FTSE Russell, for instance, has reduced the waiting period to be included in the Russell Top 500 index from a year to five trading days.

That will put the Russell Top 500 index in direct competition with the S&P 500 index. After much wrangling with consultants, S&P Dow Jones Indices' Index Committee rejected a similar fast-track proposal for its most popular benchmarks on June 4. In addition to shortening the 12-month time period for inclusion, the original S&P proposal would have eliminated another rule stating that IPO companies have four consecutive quarters of profitability before being included, which kept Elon Musk's Tesla out of the S&P 500 for 10 years after its IPO.

That same rule will keep Musk's SpaceX out of the S&P 500 for now. "That financial viability requirement was a big criticism of the S&P 500" during the years that Tesla surged, says Zachary Evens, a manager research analyst at Morningstar. The original profitability and IPO seasoning guardrails were instituted after the 2000 dot-com bubble crash, when hot but unprofitable IPOs burned investors.

Other indexes were already more IPO-friendly. Since 2012, the CRSP U.S. Total Market Index, which the $2.2 trillion Vanguard Total Stock Market fund tracks, has had a five-day IPO inclusion rule. Comegys believes that fast-tracking results in benchmarks that better reflect the public market, as long as they're float-adjusted.

But not every benchmark has the same float adjustment. Notably, the Nasdaq 100 will apply a multiple of three times float weighting to SpaceX and other subsequent large IPOs, including Anthropic and OpenAI, if they're added to the benchmark. That will probably put the initial SpaceX weighting in the $495 billion Invesco QQQ exchange-traded fund in the 0.6% to 0.7% range. Nasdaq has also reduced its IPO waiting period from three months to 15 trading days.

Such overweights relative to the float create an artificial demand for a stock that is greater than its publicly available supply, which could pose risks for index investors. IPOs have a lockup period for private shareholders before they can sell, typically six months. Afterward, private investor sales can drive down the stock -- one reason IPOs tend to underperform the market six months to a year after issuance. By the end of a lockup, it's typical for a company's free float to rise to 50% to 60% of its value, so the supply of public shares can grow dramatically.

Unlike other benchmarks, the Nasdaq 100 was never float-adjusted but weights most companies by their full capitalization. Enforcing the new three-times float rule to low-float companies -- those with public floats below 33.3% of their shares outstanding -- ensures that SpaceX's initial weighting won't be significantly higher.

A Nasdaq spokesperson, in a written statement, cited companies "staying private longer" and "listing at larger scale" as reasons for the changes, adding that "the changes were not designed for any single company, and are consistent with updates other major index providers have independently made in response to the same market dynamics."

The fast-tracking is consistent, but the Nasdaq's weighting system isn't.