Idk, I kinda agree with Matt Levine. The purpose of these ETFs is conceptually to track the "largest X companies", so including SPCX is just staying true to that.

If there's an issue I think it's earlier in the IPO pipeline.

But if SpaceX valuation drops by 2/3 before settling into a steady state, does that not mean that SpaceX is not one of the "largest X companies" but rather was overvalued?

The entire reason for these seasoning periods is to give the market time to determine what the company is actually worth to the market itself. Bypassing those rules to get it in earlier says to me that they don't believe it will settle at a price near its start.

If I IPO my lemonade stand at $1T valuation do I deserve to be in that "largest X companies" list? Or does it only make sense if I can maintain that valuation over time?

The indices driving the market are the problem.

Index investing is too high a percentage of total investing so the rules matter to the whole market.

I think a lot of people are upset that they bought something (an ETF or fund that tracks an index, for which has various rules for what gets included) and those rules get broken so the wealthiest man in the world who is also extremely close with the President of the US can get his company included on a shorter timeline. Yes, there's an issue with the IPO process but a) you can just buy SPCX if you wanted exposure b) even if it's not included you're getting decent exposure and c) the IPO process being broken is not the problem of the indexer.