Commentary: Here's how Musk's SpaceX IPO could crash your 401(k)

Fidelity Investments, the big brokerage and mutual fund firm, long has had a rule protecting its small retail clients from plunging into initial public stock offerings while the shares were still subject to IPO-related hype.In most cases, Fidelity would allow IPO investments only for clients with at least $500,000 in their brokerage accounts.No longer.

For the SpaceX IPO expected to launch on June 12, Fidelity has cut the threshold to only $2,000.This estimate borders on fantasy.— Aswath Damodaran, NYU, on SpaceX’s estimate of its market reachIt’s a curious decision, considering that the SpaceX IPO will be not only the largest such IPO in history — with a possible $75 billion in shares coming on the market, valuing the entire company at about $1.8 trillion — but potentially the most over-hyped.

SpaceX, you may know, is the biggest company controlled by Elon Musk, so if you buy its shares, you’re buying into his vision.A Fidelity representative told me that it made the change because SpaceX has reserved about 30% of its offered shares for retail investors, much more than the traditional 10%, “which means there are more shares being offered to retail clients.” Commentary on economics and more from a Pulitzer Prize winner.By continuing, you agree to our Terms of Service, which include arbitration and a class action waiver.

You agree that we and our third-party vendors may collect and use your information, including through cookies, pixels and similar technologies, for the purposes set forth in our Privacy Policy such as personalizing your experience and ads.Fidelity’s liberalized policy is an example of how Wall Street has been moving the investment goalposts in order to stuff more of SpaceX’s shares into the portfolios of ordinary investors.

Fidelity’s clients, of course, can make their own decision about whether to buy in, but that’s not the case for owners of some stock index funds, who may find SpaceX among their holdings whether they li...