Mega-IPO candidates including SpaceX are expected to face a long road to entry to the S&P 500 Index, after the company that makes the rules rejected a proposal that included relaxing the requirement that they be profitable.

S&P Dow Jones Indices¡¯ index committee declined to remove a rule that companies generate positive net income for the past year, including the most recent quarter, the firm announced Thursday after a month-long consultation.?

Evercore ISI research analysts don¡¯t expect Elon Musk¡¯s rocket, satellite and artificial intelligence company to generate positive net income on an annual basis until 2027, according to a person familiar with the forecasts, who asked not to be identified as the information isn¡¯t public. That could mean its entry is held up until sometime in 2028 if the rule remains in place.

¡°Eventually these mega-IPOs will be added to the S&P 500, unless their business models fail, so it is a question of timing,¡± said Jay Ritter, University of Florida emeritus professor and director of the IPO Initiative. ¡°Given the low floats and the huge amounts of money indexed to the S&P 500, I think it¡¯s good that they¡¯ll wait until the stocks have a more liquid market.¡±

The decision comes as Space Exploration Technologies, as it¡¯s formally known, prepares to start trading June 12. It¡¯s targeting a $1.8 trillion valuation, which would be bigger than all but six of the companies in the S&P 500, and larger than Musk¡¯s own Tesla Inc.?

The company is also set to enter indexes including the Nasdaq 100 as soon as the end of this month. Unlike S&P, Nasdaq did change its rules, allowing Nasdaq 100 entry in just 15 trading days, down from a three-month minimum. FTSE Russell adopted a similar approach, shortening the waiting time to five trading days.

A representative for SpaceX didn¡¯t immediately respond to a request for comment. A spokesperson for Evercore ISI declined to comment.

Anthropic PBC and OpenAI are also weighing IPOs as soon as this year, and could face similar hurdles to SpaceX despite expectations that the companies would be valued at more than $1 trillion each if they went public.

The AI model makers¡¯ entry to the benchmark will depend on how operations and spending balance. Anthropic¡¯s operating profit for the June quarter is expected to hit $559 million, but the company does not necessarily expect to be profitable in future quarters as it ramps up spending on computing resources and other costs.

OpenAI isn¡¯t expected to be profitable in the coming years.

¡°From a corporate strategy standpoint, it¡¯s not irrational to choose to run at a loss,¡± Lawrence Creatura, a fund manager at PRSPCTV Capital, said in an interview....