Citi: Market can absorb mega-IPOs

Key facts

• Citi analysts believe the market can absorb upcoming mega-IPOs.
• Concerns about market structure and liquidity due to large IPOs are considered overblown.
• Initial index weights for new mega-IPOs are expected to be modest due to low free floats.
• Index inclusion is weighted on free floats, not total market cap.
• SpaceX is targeting a $1.75 trillion valuation for its IPO.
• Anthropic's valuation surged to $965 billion, surpassing OpenAI's $852 billion.

Wall Street is anticipating a significant wave of mega-IPOs, leading to concerns about their potential impact on market structure and liquidity. However, Citi analysts, including JP Coviello, believe the market is well-equipped to absorb these offerings. They argue that initial index weightings for companies like SpaceX, Anthropic, and OpenAI will be relatively small due to low initial free floats, which are expected to be under 10%. This modest weighting means that passive buying required for index inclusion should be manageable, and the resulting selling pressure on existing index constituents will represent a small fraction of their total market capitalization. The Nasdaq has implemented a rule change allowing companies to list 15 days after their IPO, a move criticized by some, but Citi suggests that inclusion in indexes like the S&P 500 still requires a full year. SpaceX is reportedly targeting a $1.75 trillion valuation, while Anthropic's valuation recently surged to $965 billion, surpassing OpenAI's $852 billion. Past IPO pitfalls include Google founders interviewing Playboy during a quiet period and Salesforce CEO Marc Benioff violating SEC rules.