On a Rocketship to Mars
You may or may not personally be interested in the much-hyped initial public offering (IPO) of Elon Musk’s SpaceX (SPCX), but you will likely own shares, regardless, at some point in the future. In this article, I’m going to attempt to show what impact this could have on your retirement balances. My intention is not just to pick on SPCX, but to reiterate that investors should be more fully aware of what they are (indirectly) investing in through mutual funds and indexes.
In the case of SPCX, prior regulations regarding arbitration seem to be neutralized and waiting periods for entry into major indexes dramatically shortened. What does that mean to the regular investor? Essentially, the SpaceX corporate governance documents1 include mandatory private arbitration, meaning investors are not likely to get far with any class action lawsuits against the company. Having reincorporated in Texas, the threshold for initiating a derivative lawsuit commands billions of dollars of investment. Further, Musk retains most of the total voting power of the stock while holding less than 50% of the equity. In other words, the investor is at the mercy of a mercurial and inconsistent CEO who can afford to lose millions. And if you use indexes in your portfolio, you are most likely that investor.
In the past, indexes have mandated that a company post a profit before being added to the index.2 Also, with the hype of an IPO, there generally is a waiting period to see whether high valuations come down during the first months or year of the release before being added to the indexes. Neither of these requirements seem to apply to SPCX, which has posted almost $5 billion in losses in the 2025 fiscal year, and higher losses in 2026 with the merger of xAI and X (formerly Twitter) with SpaceX.3 Fast-track rules at major indexes (like Nasdaq 100 and Russell 1000) mean that mutual funds and ETFs that track those indexes will have to add SPCX almost immediately at likely its highest valuation. This, in turn, means that other, more stable companies will be sold in the index to make room for SPCX. At the last minute, S&P Global abandoned plans to also fast track the company but will likely add it to the S&P 500 Index in a year. Also note that certain insiders were given the ability to sell their pre-IPO shares as early as 70 days after the IPO, which could cause price volatility that the indexes will have to absorb (i.e., purchase more shares while the price is dropping) to maintain the market weight of company in the portfolio.4
You may be all in on SpaceX but knowing that norms designed to keep investors relatively safe that have been in place for years are being abandoned to accommodate this new breed of IPO should set off some alarm bells. If that’s the case for you, then here’s a few things you may want to do to determine your exposure:
- Use the ticker symbol associated with any mutual fund that you own to research the underlying holdings in that fund. You can do this through the brokerage site, the fund family site, Morningstar.com, or SEC EDGAR.5
- Check out the websites associated with indexes in which you have invested through index funds or ETF for a full list of constituents.
- Note the size of the company investment relative to the overall portfolio or index.
- If you are ambitious, you can also calculate that relative position for your own portfolio. If you want to see what portion you may own in various index funds, the New York Times has a handy calculator6 that will do the math for you.
You may not be concerned about SPCX in particular or are happy to be getting a piece of the action through your retirement plan. However, as we have mentioned in previous articles, there is additional risk already built into the indexes these days. With the Magnificent 7 occupying approximately one-third of the S&P 500 Index and higher levels of certain growth fund portfolios, balances can take wide swings when news breaks on any one of these companies. While the investment options in your plan are meant to be individually diversified, as well as being appropriate to pair with other options as part of a total portfolio, as the investor, you should be aware of the underlying mutual fund portfolio details. This is especially true if you have areas of the market that you do not want to invest in or have concerns about outsized risk which could impact portfolio performance. Your options to avoid certain companies may be limited, but you can certainly lessen the impact of your personal investment through thoughtful selection of other available options. Let us know if you need help in evaluating your retirement portfolio.
Meet Kristan Anderson, CEBS®, CFP®
Read the August 2026 Financial Planning Focus:
- "Is a Domestic Partnership Right for You?" by Laurie Kramer, CFP®
- "When to Call in an Expert" by Matt Cohen, CFP®, CIMA®
- "What’s the Basis for That?" by Kristan L. Anderson, CEBS®, CFP®
Sources:
1https://www.sec.gov/Archives/edgar/data/1181412/000162828026042639/spaceexplorationtechnologi.htm
3https://www.sec.gov/Archives/edgar/data/1181412/000162828026042639/spaceexplorationtechnologi.htm
5https://www.sec.gov/edgar/search/#
6https://www.nytimes.com/2026/06/12/upshot/spacex-stock-ipo.html
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