A Bank of America’s equity market analysis warns that the anticipated initial public offerings (IPOs) of SpaceX and Anthropic may not be uniformly positive for investors; very large IPOs could flood the market with shares and place substantial pressure on existing stocks. The CNBC reported the bank’s note.
Savita Subramanian, Bank of America’s equity strategist, said market adjustments — including index providers accelerating admission rules and altering free-float calculation methodologies — resemble late-stage bull market behavior. According to Subramanian, such conditions can create a speculative environment in which retail investors buy shares quietly sold by institutional holders, often signaling an impending market pullback.
The bank highlighted that large primary equity offerings can inundate the market with new shares, undermining a key narrative that supported the recent rally: shrinking equity supply. The number of publicly listed companies fell from roughly 8,000 at the 1990s peak to about 4,000 last year, driven by buybacks, longer private incubation periods and delistings. Subramanian believes this trend could reverse, leading to what she calls a potential “supply deluge.”
New share issuance would likely hit big technology stocks the hardest. The S&P 500 rose by more than 10 percent in April, driven by strong gains in the so-called "Wonderful Seven" tech group, which accounts for roughly one-third of the S&P 500’s weighting. Subramanian cautioned that IPOs could impose the most pressure on these mega-cap tech names.
The market structure amplifies the risk because about 60 percent of U.S. assets are managed by passive funds, whose portfolios are heavily positioned in large-cap technology stocks. If passive funds need to free up capital to buy new issuances, they may have to shrink existing holdings, putting additional downward pressure on those shares.
The Bank of America note also points to the influence of the retiree cohort, which holds approximately $8 trillion in cash and tends to prefer dividend-paying stocks over growth shares, a preference that could further shape capital flows.
Market reports cited by CNBC say SpaceX could list as early as June, potentially targeting a valuation above $2 trillion at IPO. Anthropic’s debut is expected in October; based on its most recent funding round, the artificial intelligence company’s valuation could exceed $900 billion.
In summary: Bank of America warns that these two very large IPOs could materially increase equity supply and exert outsized pressure on large tech stocks and the passive funds that hold them, a development that could alter market dynamics even as indices sit near historic highs.
