States challenge Nasdaq, FTSE Russell for fast-tracking SpaceX
(Corrects the number of states challenging the indexes in the first paragraph from five to four)
* Government officials urge Nasdaq and FTSE to pause rule changes pending risk review
* Concerns raised regarding SpaceX’s valuation, management and impact on passive funds
* Nasdaq says methodology updates reflect changes in market
* S&P Dow Jones retained traditional entry criteria, unlike Nasdaq and FTSE Russell
June 11 (Reuters) – Investment leaders from four major states pressed Nasdaq and FTSE Russell for details on recent rule changes favoring SpaceX and other major IPOs and suggested index providers pause moves unless they review the risks to investors. The letters to both companies, seen by Reuters on Thursday, raise concerns about the impact Elon Musk’s rocket and satellite communications company could have on other investors with its record-breaking $75 billion exit. Once trading began, SpaceX’s massive valuation and tight governance structure created risks such as high volatility and conflicts of interest between index firms and users, officials said. Passive funds are poised to buy billions of dollars in SpaceX stock depending on when it joins high-profile indexes. While both Nasdaq and FTSE have relaxed entry criteria, such as shortening trading history requirements, S&P Dow Jones has stuck to tradition.
“We respectfully urge the Board of Directors of the FTSE Russell Index to reconsider the methodology changes and not to put the interests of public companies and their underwriters ahead of the interests of passive fund assets that will bear the cost of mispricing that may arise in SpaceX or other IPOs to follow soon, such as OpenAI and Anthropic,” read one of the letters sent to FTSE Russell and its parent company, the London Stock Exchange Group, or LSEG.
It was signed by New York State Treasurer Thomas DiNapoli, New York City Treasurer Mark Levine, Illinois State Treasurer Michael Frerichs and Maryland Treasurer Brooke Lierman. All state pension assets are supervised, including passive funds that will become mandatory buyers of SpaceX based on index actions.
An LSEG representative declined to comment.
A similar letter was sent to Nasdaq by Frerichs, Lierman and Oregon Treasurer Elizabeth Steiner. Like the letter to FTSE, the letter to Nasdaq asked its recipient to halt implementation of the rule unless it conducted a formal investor impact analysis of the change.
“If so, we request that this analysis be made public. If not, we ask that you explain why a rule change affecting over $1.4 trillion in investor assets was adopted without such analysis,” the letter said.
Officials also sought an explanation of how Nasdaq was balancing internal tensions and whether any companies, including SpaceX or its consultants, played any role in developing the new rule.
In a statement sent by a representative, Oregon’s Steiner said he was “deeply disturbed” by the exchanges’ actions. He said they may be forcing institutions such as pension plans “to buy stocks (through index funds) that haven’t proven their value or gone through the rigors of market corrections.”
Asked about the letter, a Nasdaq spokesperson said via email: “Public markets look fundamentally different than they did a decade ago, with companies staying private longer, listing at a larger scale, and coming with more complex share structures. Updates to the Nasdaq-100 methodology reflect these changes and were implemented following a formal public consultation.
“The changes are not designed for a single company and are consistent with updates that other major index providers have made independently in response to the same market dynamics,” a Nasdaq spokesperson said.
(Report by Ross Kerber)
