SpaceX Officially Joined the Nasdaq-100 and Received a $300 Price Target From Wall Street. Here's Why the Stock Is Falling Anyway.

On July 7, Space Exploration Technologies (NASDAQ: SPCX) joined the Nasdaq-100 -- which is the 100 largest non-financial companies by market cap listed on the Nasdaq stock exchange. It also received a $300 price target from Morgan Stanley, one of the Wall Street banks that underwrote SpaceX's initial public offering (IPO).

Being a part of a major index is more than just name recognition. Exchange-traded funds (ETFs) benchmarked to the Nasdaq-100, such as the Invesco QQQ Trust (NASDAQ: QQQ), will begin buying shares of SpaceX. The more indexes a company can be a part of, the more demand is unlocked from ETF inflows -- the crown jewel being the S&P 500 (SNPINDEX: ^GSPC), because the largest ETFs in the world are linked to it.

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Here's why SpaceX was added to the Nasdaq-100 so quickly, and why the growth stock is falling anyway.

SpaceX will soon be a top holding in the Nasdaq-100

The Nasdaq's new fast-track rules are meant to expedite the inclusion of megacap companies that recently had IPOs. If a company is at least as valuable as the 40th-largest Nasdaq listing, which is a market cap of around $121 billion, it can now be added to the Nasdaq-100 after its 15th trading day. SpaceX has a market cap of around $2 trillion and is the world's seventh-most valuable company -- so it clears the size hurdle with ease.

SpaceX went public on June 12, but markets were closed on Juneteenth (June 19) and July 3. So, it wasn't added to the Nasdaq-100 until over three weeks after its IPO. However, SpaceX's weight in the Nasdaq-100 isn't its market cap. Rather, it is based on a multiple of the float, which is the number of shares available for trading by the public. SpaceX's float is around just 5% of its market cap. But the float could increase rapidly in the coming months.

The vast majority of SpaceX stock is held by insiders who bought in when the company was private -- including institutional investors from previous funding rounds, employees, and founders. SpaceX plans to gradually unlock early-release-eligible shares through a tiered system over the next 180 days, with 20% of shares available for trading two days after the release of its earnings for the quarter ended June 30, and up to 30% if SpaceX's stock price is at least $175.50 per share.