Nasdaq's IPO Rule Changes Harm Index Investors

Nasdaq's proposal would add large IPOs to the Nasdaq-100 index only 15 trading days after their public debut, entirely waiving the existing 10% float requirement for high market cap stocks. Owen A. Lamont, Senior Vice President at Acadian Asset Management, labels the proposal "arbitrary, unfair and potentially risky," echoing concerns from Jason Zweig of The Wall Street Journal, Patrick Boyle on Finance, and Robin Wigglesworth of The Financial Times.

Lamont highlights the case of VinFast, which listed with a 1% float in August 2023, saw its valuation briefly reach $200 billion, and subsequently plummeted from $17.21 to $3. He argues that a 15-day period is insufficient for proper price discovery, especially given underwriter price stabilization and initial difficulties in short selling.

In contrast, the S&P 500 mandates a 12-month "seasoning" period, which facilitates orderly price discovery and allows arbitrageurs to accumulate shares ahead of index fund demand. Research by Murray and Sammon (2026) on the CRSP total stock market index, which has a 5-day seasoning period, indicates that index investors are forced to buy at elevated prices, with shares falling by as much as 10% in subsequent months, while issuers raise 6% more capital.

Lamont concludes that giant IPOs warrant stricter, not looser, rules to prevent index investors from being "stuck holding the bag."