> To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want.

I can't imagine "any price they want" is quite right here. At the very least, shouldn't we expect underwriters and other stakeholders (in this case Nasdaq, Inc.) to negotiate option-contracts as part of the IPO deal to cover their future obligations?

Yes, it might be a "worse" deal than those initial 5% - though we don't even know that - but then institutional investors time horizons are typically much longer than 6 months. Unless you think SpaceX goes straight down to 0, it seems like a risky but calculated, long-term investment.

I agree they could be more transparent about it, but maybe they will send out a notice in the prospectus update?

▲

riffraff 6 hours ago | parent [-]

Index funds have a variety of ways to replicate the index beyond physical replication, including options, buying "similar things", sampling etc..

So yeah, they don't really need to stick to 100% of the presented issue.

▲

Galanwe 5 hours ago | parent [-]

Index funds and ETFs also have strict replication rules limiting the amount of non-physical replication in their legally binding prospectus...

The more physical a tracker is, the lower the tracking error, but also the more fees you have to pay. "Good" ETFs/IFs are often 98% physical. This makes for higher fees, but more safety for subscribers in case of large swings.

So it's not like they are _free_ to replicate however they see fit, the replication mechanism is part of the product.

▲

hhh 4 hours ago | parent [-]

What does physical mean in this context?

	▲	names_are_hard 3 hours ago \| parent [-]
		It means holding the actual stocks in the underlying index, as opposed to synthetic replication, which aims to achieve returns matching the index via derivatives or other techniques. It's physical in the sense that literal means not literal nowadays.