Joining the Nasdaq-100 represents a big milestone, as it includes the biggest non-financial companies on the Nasdaq. The idea is, once a company joins, it may see its share price advance as managers of funds tracking this index buy shares — since their funds must mimic the index's performance, they have to make these additions.
The Nasdaq-100 rebalances annually to remove certain members and add new ones, and it also may add members at other points in the year. And this brings me to the reason why the Nasdaq-100 has drawn attention in recent times. The index adjusted its admission rules to allow companies in sooner after their market launches than ever before — and that resulted in Space Exploration Technologies (NASDAQ: SPCX) joining the Nasdaq-100 earlier this month.
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So now, with SpaceX newly in the index, investors may be wondering: What happens to stocks after joining the benchmark? History has a clear answer.
So, first, a note about SpaceX. The company, a giant in rocket launches, satellite-based connectivity, and artificial intelligence (AI), has drawn great attention from investors due to this dynamic mix of businesses. And some investors also like the idea of being involved in a business led by Elon Musk. Also at the helm of electric vehicle giant Tesla, he's known for his commitment to innovation.
SpaceX's IPO, the world's largest, was massively oversubscribed, and the stock rose right out of the gate, gaining 67% from the IPO price of $135 to a peak of $225 on June 16. And the company's trillion-dollar valuation helped it land a spot on the Nasdaq-100 on July 7, about 15 days after its launch as part of the index's new "fast track" rules. Prior to this, a company had to wait at least three months for inclusion.
So far, the Nasdaq-100 addition hasn't brought SpaceX lasting gains. The stock has declined from its peak, and as of the July 17 market close, SpaceX traded at $123.99, significantly below its IPO price.
For some clues about what may happen next, let's turn to history. We'll consider some of the new additions to the index over the past three years and their performances in the two months following their entrance.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
