**[Will SpaceX's Mega IPO Drain U.S. Stock Market Liquidity? Analysis Suggests It's a False Alarm, Actual Index Fund Buying Limited to $30 Billion]** According to monitoring by Beating, the U.S. stock market is gripped by severe liquidity drain fears in the face of impending IPOs from mega-giants like SpaceX, Anthropic, and OpenAI, with valuations exceeding $4 trillion. Addressing market concerns over liquidity, Rob Arnott, Chairman of RAFI Indices, wrote that actual index rules will serve as a critical "firewall," preventing the market from collapsing due to concentrated passive fund buying. In an extreme stress test scenario, Arnott pointed out that if SpaceX were to IPO at a $2 trillion valuation and only 4% of its shares (equivalent to $80 billion) were publicly floated, and if index committees immediately included SpaceX at full market cap weighting, the $18 trillion in funds tracking major U.S. indices would be forced to buy over $500 billion worth of stock—far exceeding the $80 billion actually available for sale. Such extreme concentrated allocation could theoretically drive stock prices to infinity, potentially paralyzing the U.S. stock market. However, actual rules render this collapse risk a false alarm. The float-adjusted mechanisms adopted by major indices would cap index fund buying at around $30 billion. While a $30 billion liquidity withdrawal could still trigger significant market volatility, it would not lead to a market crash. Arnott warned that the real pain point of mega IPOs lies not in temporary liquidity shocks but in the distorted valuation dynamics caused by passive index funds. Since 2012, the performance of S&P 500 constituents has wildly outpaced mid-cap stocks (Next 500), widening the valuation premium between the two to an extreme 80%. However, from a fundamental perspective, over the past 25 years, the cash flow growth of S&P 500 giants has actually lagged behind that of the second-tier companies by 3%. This suggests that the prosperity of large-cap stocks is almost entirely driven by premium bubbles rather than fundamentals. If passive funds are forced to buy SpaceX at high valuations, it will only exacerbate this unsustainable valuation bubble. Meanwhile, companies excluded from the indices, with solid fundamentals, are the true long-term winners who will have the last laugh. [Original Link]