From Eligibility to Inclusion: Bringing Clarity to the Mega IPO Debate
The debate around mega IPO entry into broad market index families has highlighted how easily key distinctions between index providers and their methodologies can get lost. Given the scale of investor interest and the assets tracking the CRSP Market Indexes, which will be rebranded the Morningstar Market Indexes next month, it’s important to emphasize some key principles guiding our recent rule enhancement that will allow mega IPOs with low float percentage to be included in our indexes.
1) Our recent methodology change was principles-based, not event-driven
Updated in April 2026, the methodology for the CRSP Market Indexes was adjusted to allow companies to be added based on their absolute free-float. Under the updated rule, companies with sufficient absolute float can be included in the index even when their float percentage falls below the traditional threshold, enabling the CRSP Market Indexes to continue to accurately reflect the investor opportunity set. Our enhanced rule applies broadly to any potential index addition, including future mega IPOs, and they too will be evaluated using the same transparent, objective criteria.
2) Broad market index construction should not be driven by a view on valuation
Assessing the “right” time to include a company in a portfolio is the role of active management. Our role as index providers is not to assess valuation or express a view on price. Our responsibility is to provide transparent, rules-based representation of the investable market, and to ensure that large new entrants are included using clear and objective criteria.
3) Transparency requires clarity on both eligibility and inclusion
Our construction rules address not only whether a company is eligible for index inclusion, but also how and when it may be included in practice. Eligibility thresholds, in isolation, can be informative but incomplete. The disclosure of explicit inclusion criteria provides a more fully specified and observable process.
4) Full transparency supports anticipation and informed evaluation
The fact that the industry is able to have the debate is because of the transparency of our methodology. Not only can investors understand what is coming, but market participants can debate our decisions about the rules and the potential outcomes. You may not always agree with the result, but at least you know how it happened.
5) Broad market indexes should reflect the entire opportunity set, including future mega IPOs
Regardless of the debate around timing, mega IPOs will eventually become part of the investable universe, and should be included in broad market indexes. Our broad market index methodology is designed to include these companies in a systematic, transparent way. Methodologies not designed to capture the broad market may not ever include some mega IPOs, and methodologies that are not fully transparent leave questions about future inclusion unanswered.
As IPOs continue to grow in size and influence, index methodologies that address both scale and investability will play an increasingly important role in how the market is represented. Ultimately, the CRSP Market Indexes seek to provide a clear and reliable option for investors, and our role is to make the index process transparent, consistent, and visible to every investor who relies on our indexes.
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