Space stocks retreated overnight after S&P Global confirmed it would make no changes to S&P 500 eligibility rules, eliminating a key catalyst traders had been pricing in ahead of SpaceX’s blockbuster IPO.
AST SpaceMobile (NASDAQ: ASTS) fell 2% in overnight trading, while Rocket Lab USA (NASDAQ: RKLB) and Redwire (NYSE: RDW) each declined 3%, and Sidus Space (NASDAQ: SIDU) shed 1% during the same session.
The drop followed a broad rally on Thursday, when space stocks climbed on optimism surrounding SpaceX’s IPO roadshow hosted by JPMorgan, where CEO Elon Musk pitched a vision for more than 100,000 Starlink satellites and orbital AI infrastructure.
S&P Dow Jones Indices stated that “no changes” would be made to eligibility criteria for the S&P 500, S&P MidCap 400, and S&P SmallCap 600 following its consultation on the treatment of newly listed megacap firms.
The index provider confirmed that financial viability requirements, IPO seasoning periods, and minimum investable weight-factor rules would all remain intact, dealing a direct blow to hopes of a passive-fund buying surge tied to SpaceX’s debut.
S&P stated that “exceptions to the financial viability, seasoning, and IWF requirements should not be granted solely based on market capitalization,” a ruling that directly blocks SpaceX given its $4.94 billion net loss in 2025.
S&P 500 constituents must generate positive GAAP earnings in both the latest quarter and the trailing four quarters to qualify for inclusion, a bar SpaceX currently cannot clear.
SpaceX’s IPO is set to price on June 11, with shares expected to begin trading the following day, at $135 per share across 555.6 million shares, raising $75 billion and valuing the company at $1.77 trillion.
On a fully diluted basis, that valuation exceeds $1.8 trillion, making the offering one of the largest in history, though investors have flagged concerns about the company’s financial performance relative to its asking price.
SpaceX’s IPO filing described its opportunity as the “largest actionable total addressable market in human history,” estimating a $28.5 trillion market spanning launch services, Starlink connectivity, direct-to-cell communications, and AI infrastructure.
The S&P ruling undermined a widely circulated investment thesis that passive index fund inflows could amplify demand for SpaceX shares and lift the broader space sector in the weeks following the IPO.
Tesla influencer Alexandra Merz, CEO of L&F Investor Services, had previously estimated that Nasdaq-100 index funds could eventually be required to purchase between $8 billion and $12 billion worth of SpaceX stock following inclusion.
Merz also projected that FTSE Russell indexes could contribute another $10 billion to $15 billion in demand, while CRSP benchmarks tracked by Vanguard funds could add between $15 billion and $25 billion in demand based on float-adjusted market cap.
Posting on X under the handle TeslaBoomerMama after S&P’s announcement, Merz said, “S&P will regret this,” adding that “many investors will want index funds that have SpaceX, Anthropic and OpenAI in them” and would “move to Nasdaq 100 rather than S&P index funds.”
She further stated that “S&P has never been friendly with Elon’s company, that’s not news,” reflecting frustration shared by retail investors tracking the IPO closely on social platforms.
Despite the S&P setback, SpaceX retains alternative index pathways, as Nasdaq has already modified its rules to allow newly listed megacap companies to become eligible for the Nasdaq-100 after as few as 15 trading days.
SpaceX has also become eligible for inclusion in FTSE Russell benchmarks under newly adopted fast-entry rules, meaning significant passive buying demand could still materialize through those channels after trading begins.
S&P did approve fast-track inclusion changes for its broader S&P Total Market Index, S&P Completion Index, and Dow Jones U.S. Total Stock Market Index, allowing certain large IPOs to qualify with five business days’ notice under updated float-adjusted market cap requirements.
On Stocktwits, SpaceX drew “extremely bullish” sentiment amid “extremely high” message volume, while RDW carried “extremely bullish” sentiment with “high” message volume and SIDU remained “bullish” amid “normal” message volume.
Over the past year, RKLB has surged 346%, ASTS has gained 274%, SIDU has advanced 218%, and RDW is up 26%, underscoring the sector’s sharp run higher in anticipation of SpaceX’s public market arrival.
