SpaceX $1.75 Trillion IPO: 1 Stock Poised to Be the Biggest Loser

Key Points

SpaceX's upcoming monster IPO will force a major reshuffling of the S&P 500.

EPAM Systems appears to be the stock most likely to be removed from the index to make way for SpaceX.

Exclusion from the S&P 500 leads to selling by index funds that can create downward pressure on a stock's price.

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Winners get most of the attention. We're seeing that with SpaceX's upcoming initial public offering (IPO). With the space technology company targeting a valuation of around $1.75 trillion, early investors will be huge winners -- especially Elon Musk, who already ranks as the world's wealthiest person.

However, the less-heralded story with SpaceX's IPO is that there will also almost certainly be a big loser. It's easy to identify the one stock that's at the most risk.

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The S&P shuffle

A $1.75 trillion market cap at its IPO will instantly make SpaceX the world's largest industrials stock. It will also rank SpaceX among the top 10 largest companies in the U.S. In the investing world, size matters.

The S&P 500 (SNPINDEX: ^GSPC) includes the 500 biggest U.S. companies. This index is rebalanced regularly to reflect changes in companies' valuations. SpaceX's IPO will force a massive reshuffle.

It's a foregone conclusion that SpaceX will be added to the S&P 500 soon. But the index won't change its name to the S&P 501. Another stock must be evicted to make room for SpaceX. The unlucky stock will be the one with the smallest market cap. That dubious honor currently belongs to information technology services company EPAM Systems (NYSE: EPAM), with a market cap of roughly $6 billion.

Of course, EPAM Systems' share price could soar between now and the time the S&P 500 shuffle occurs. Other stocks near the bottom of the totem pole include Campbell's (NASDAQ: CPB) and ConAgra Brands (NYSE: CAG), which sport market caps of $6.2 billion and $6.8 billion, respectively.

EPAM is arguably the best bet for expulsion from the index, though. Its decline this year has been steeper than those of Campbell's and ConAgra, fueled in part by a big sell-off of SaaS stocks. Also, with inflation worries reigniting, consumer staples stocks like Campbell's and ConAgra could be better positioned through the rest of the year than EPAM.

The kicked-out kicker

What's so bad about a stock getting kicked out of the S&P 500? The index is just a list of stocks, right? Not really. Multiple widely followed index funds track the S&P 500. When the index changes, these funds must buy shares of the new addition(s) and sell any stocks that dropped out of the index.

For example, the Vanguard S&P 500 ETF (NYSEMKT: VOO) has total net assets of $1.4 trillion. The State Street SPDR S&P 500 ETF Trust (NYSEMKT: SPY) has assets of around $728 billion. When these massive funds sell their shares of a stock, the sales can create short-term downward pressure on the stock's price.

Granted, removal from the S&P 500 isn't necessarily a kiss of death for a stock. As a case in point, Solstice Advanced Materials (NASDAQ: SOLS) was booted from the index on Dec. 22, 2025. Its shares have soared more than 60% since then.

However, exclusion from the S&P 500 typically leads to lower institutional ownership and trading volume. Analyst coverage can also wane. These factors can affect a stock's performance.

EPAM in the danger zone

Make no mistake about it: SpaceX's public listing will be an enormously consequential market event. Investors who focus only on the positives from the IPO will miss part of the story. However, you can rest assured that the "smart money" won't. Many institutional investors could begin to position their portfolios for the anticipated rebalancing of the S&P 500 well before it actually happens.

Perhaps EPAM Systems will escape the chopping block. But the beaten-down tech stock is absolutely in the danger zone to be the biggest loser from what's set to be the biggest IPO in history.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends EPAM Systems. The Motley Fool recommends Campbell's. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.