'Passive' investors who dodged bitcoin are now forced to own SpaceX, which is three times more volatile
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- SpaceX carries a $2.7 trillion market cap (the world's fifth-largest) after a 4.5% rally on Tuesday, with CRSP, Nasdaq, FTSE Russell, and MSCI all making accommodations to integrate it into their large-cap trackers this summer.
- SpaceX's implied volatility sat near 120 on Tuesday — roughly three times the iShares bitcoin ETF (IBIT) — making it the most volatile stock in the S&P 500 and Nasdaq 100 and the only trillion-dollar-plus company that doesn't make money.
- Vanguard Growth Index Fund ETF (VUG) holders and other passive investors will soon own SpaceX involuntarily, prompting Strategic Investment Solutions partner Ayman Saidi to accuse Vanguard and other index-tracking managers of 'betraying U.S. savers' and creating 'a major market distortion.'
- Delphi Digital co-founder Kevin Kelly said investors 'allergic to volatility' should just buy bonds, noting that AI stocks 'look like early token charts' and that SpaceX is so polarizing some sell-side analysts 'couldn't even get past this if it IPO'd at $600-or-700 billion.'
- SpaceX's index addition will dwarf Strategy's Nasdaq 100 inclusion in December 2024, when Strategy traded under a $100 billion market cap — meaning the volatility impact on indexes will be far more pronounced this time.
- Convex Asset Management CIO Noel Smith argued the volatility spike may be temporary, telling the outlet index inclusion will cut SpaceX's vol from 120, citing HFT rebalancing, non-selling passive flows, and added liquidity, and noted that later-dated options contracts already show implied vol slipping.
Why it matters: Passive investors holding broad index funds like VUG will become owners of the most volatile trillion-dollar stock on the market — a money-losing company with implied vol three times that of IBIT — without any opt-in choice, mechanically raising the volatility profile of core U.S. large-cap benchmarks this summer.
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