The phrase sounds almost impossible: a short squeeze involving index funds. After all, index funds are designed to be passive, rules-based buyers, not active traders caught on the wrong side of a position. Yet that is exactly the scenario Animal Spirits hosts Michael Batnick and Ben Carlson laid out on Episode 467, “The Biggest Short Squeeze of All-Time,” citing Bloomberg columnist Matt Levine. With SpaceX targeting a June 12, 2026, NASDAQ debut under ticker SPCX at a $1.75 to $1.8 trillion valuation, the mechanics are about to be tested in public.
How SpaceX Could Force Index Funds to Buy at Any Price
Levine’s “maximally cynical approach” works like this. A company could “do an IPO, sell like one share of stock to the most ardent possible Elon Musk fan asset manager at a $2 trillion valuation,” lock up everything else, and wait for index inclusion to do the rest. Once the stock qualifies for a major benchmark, every fund tracking that benchmark has to own it.
Forced buyers meeting a deliberately scarce float produce one outcome: “You have effectively created a short squeeze for the index funds. They have to buy stock at any price, and there isn’t enough stock for them to buy.”
SpaceX’s S-1 makes the float math credible. SpaceX’s filing confirms a 366-day lock-up covering 100% of the Founder’s shares and those of significant investors, underwritten by Goldman Sachs. That is the mechanical basis for a stock that trades thin and rich for over a year.
Why the Short-Squeeze Theory May Be Overstated
Bloomberg Intelligence puts the actual passive demand at nearly $20 billion, roughly a quarter of the $75 billion raise. Under float-adjusted index rules, SpaceX would slot in around the 195th position in the S&P 500, near Amgen and Gilead, rather than near the top.
That comparison offers useful context. Amgen (NASDAQ:AMGN | AMGN Price Prediction) carries a market cap of nearly $182.5 billion with a trailing P/E of 23. Gilead Sciences (NASDAQ:GILD) has a market cap of roughly $160 billion and a trailing P/E of 17. Neither moves the index much on its own, and a float-adjusted SpaceX entering near that rank would not blow up SPY’s top ten. Carlson’s view, that excluding the top-15 names from cap-weighted indexes “would be bizarre,” reflects how index providers have long handled this.
Should Mega-Cap IPOs Face Stricter Listing Rules?
The hosts question whether the current framework can cleanly absorb mega-cap IPOs. Index inclusion timelines can be as fast as 15 days, which may be too short for genuine price discovery on a stock with most of its supply locked. Batnick floated a “half-baked idea”: require companies above a certain valuation to go public earlier and float more stock. “You can’t come public at a $4 trillion market cap and only release 4% of the float to investors,” he argued.
The Real Risk Is the Coming Supply Wave
The broader risk has less to do with one squeeze and more to do with capacity. The hosts estimate potentially $250 billion in new shares from SpaceX, OpenAI, and Anthropic combined, layered on top of Alphabet (NASDAQ:GOOGL) and its $80 billion raise, the company’s first equity offering since 2005.
Alphabet enters that supply wave from a position of strength. The company posted a 116.77% one-year gain through June 3, 2026, and Q1 results delivered strong results with strong Google Cloud growth. Shares have still pulled back 7.67% over the past week, hinting that rebalancing anxiety is already showing up in the stock.
As Batnick put it, “the money’s got to come from somewhere.” When this much new equity hits at once, funds may need to trim existing holdings to fund the new buys, which can pressure unrelated mega-caps. The practical takeaway is simpler: a historic supply wave is coming, and existing portfolio positions are likely going to be the funding source.
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