A version of this article originally appeared in Quartz’s members-only Weekend Brief newsletter. Quartz members get access to exclusive newsletters and more. Sign up here.
Saudi Aramco’s 2019 IPO is the largest in history, bringing in over $25 billion. In a few months it will be the third largest, and the year will not be over.
SpaceX is expected to go public in June, raising somewhere between $40 billion and $80 billion at a valuation that could reach $1.75 trillion. OpenAI, currently valued at $852 billion, is targeting a listing that could push that figure past $1 trillion. Anthropic, valued at $380 billion in its most recent funding round, could fetch more than $60 billion in an IPO that some analysts project could value the company at over $640 billion.
Together, three companies are preparing to enter public markets in a single year with around $3 trillion in combined market capitalization.
The records are about to fall, and so are some of the rules. The people responsible for those rules seem to agree that is the right call.
“They’re exceptional in every regard,” said Tomasz Tunguz, a venture capitalist at Theory Ventures who has written about the financial mechanics of the listings. “And we need to make exceptions for them.”
When a company goes public, it does not automatically land in the indexes that most Americans hold in their 401ks and retirement funds. First it has to prove it belongs there.
That means two things. It needs to have been trading long enough for the market to get a real read on its price, typically at least three months. And it needs float, the percentage of a company’s shares that actually trade freely on public markets, as opposed to sitting locked up with founders, early employees and institutional backers.
Float matters because index funds need to be able to buy and sell large quantities of a stock efficiently. A company where only a sliver of shares are available is too volatile to sit inside a portfolio that millions of retirees depend on. The S&P 500 requires 50% public float for inclusion.
SpaceX is reportedly planning to debut with somewhere between 3% and 8% of its shares in public hands.
Getting from there to 50% will take years. Tunguz ran the numbers. “If you need a trillion dollars worth of stock to move into public float and you have four billion dollars trading each day in SpaceX, you’re talking two, three, four years of trading before it qualifies,” he said.
That creates a problem with no clean solution. SpaceX would instantly rank among the six largest publicly traded companies in the United States. An index meant to represent the American stock market that excludes the sixth largest company in it is not really representing the American stock market.
