VTI vs. VOO: Which Vanguard ETF Will Buy More SpaceX Stock After Its IPO?

The SpaceX initial public offering (IPO) is set to take place on June 12, with the company raising $75 billion at a valuation of $1.77 trillion. The sheer size of SpaceX has ripple effects through the investing world, from the major indexes to exchange-traded funds (ETFs).

Although SpaceX was initially expected to be fast-tracked for entry into the S&P 500 (^GSPC 2.64%), S&P Dow Jones Indices released a press release on June 4 rejecting its earlier proposal. Now, SpaceX and other megacap companies like Anthropic and OpenAI will have to wait at least 12 months after their IPOs to join the S&P 500.

Here's how the news impacts the two largest ETFs by net assets -- the Vanguard S&P 500 ETF (VOO 2.60%) and the Vanguard Total Stock Market ETF (VTI 2.68%) -- and which one will own more SpaceX after its IPO.

The Vanguard S&P 500 ETF and the Vanguard Total Stock Market ETF have identical 0.03% expense ratios, which is the lowest of any index fund or ETF.

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The Vanguard S&P 500 ETF uses the S&P 500 as a benchmark, while the Vanguard Total Stock Market ETF uses the CRSP U.S. Total Market Index. So while the Vanguard S&P 500 ETF has the same holdings as the S&P 500, the Vanguard Total Stock Market ETF has far more holdings -- 3,494 to be exact. However, both ETFs have similar long-term performance because the S&P 500 accounts for the vast majority of the U.S. stock market's value.

In practice, both ETFs will have the same top 500 holdings, but the Vanguard Total Stock Market ETF will assign slightly lower weightings to each stock to make room for the 3,000 or so smaller companies.

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The biggest differences are with the largest companies.

Company

Market Cap

Vanguard S&P 500 ETF Weight

Vanguard Total Stock Market ETF Weight

Nvidia

$5.3 trillion

7.9%

6.6%

Alphabet

$4.57 trillion

6.5%

5.8%

Apple

$4.51 trillion

6.5%

5.7%

Microsoft

$3.18 trillion

4.9%

4.4%

Amazon

$2.73 trillion

4.2%

3.7%

Broadcom

$1.98 trillion

3.2%

2.9%

Meta Platforms

$1.59 trillion

2.2%

1.9%

Tesla

$1.56 trillion

1.7%

1.6%

Berkshire Hathaway

$1.03 trillion

1.4%

1.2%

JPMorgan Chase

$833 billion

1.3%

1.1%

The SpaceX IPO, and likely Anthropic's and OpenAI's, throw a wrinkle in the composition of these funds. The Vanguard S&P 500 ETF won't buy a stock until it's part of the index, but the Vanguard Total Stock Market ETF will buy a stock shortly after its IPO, regardless of what index it is in. However, the Vanguard Total Stock Market ETF will likely base the weighting of that position on the total shares available for public trading, known as the float, rather than the market cap.

As insiders sell shares and more shares become available for public trading, SpaceX's weight in the Vanguard Total Stock Market ETF and other ETFs will increase. And if SpaceX is added to the S&P 500 shortly after its 12-month window expires -- in June 2027 -- then it will probably be based on market cap, assuming SpaceX's float is large enough.

In sum, SpaceX will start with a higher weighting in the Vanguard Total Stock Market ETF, but it will eventually be a higher weighting in the Vanguard S&P 500 ETF. Meaning that investors who want initial exposure to blockbuster IPOs would be better off buying the Vanguard Total Stock Market ETF since it isn't restricted by index rules.