Research Affiliates founder Rob Arnott stated that mega IPOs from companies like SpaceX, Anthropic PBC, and OpenAI could divert hundreds of billions of dollars away from existing stocks, potentially creating a multi-year drag on the broader equity market.
This diversion effect may take some time to materialize, following the S&P Dow Jones Indices' decision not to accelerate the inclusion of these large new issues into its benchmarks. However, in Arnott's view, as these companies' weights within the indexes gradually increase, the impact will naturally take longer to transmit to the rest of the market. Arnott is a pioneer in smart beta investing, and his firm's strategies are adopted by institutions such as Pimco and Invesco. "This is going to disturb the capital markets, and it already is," Arnott said. He is known for his research on fundamental indexing, a methodology that determines index constituent weights based on metrics like earnings and cash flow. (WSJ)