SpaceX Inclusion Exposes E/P Quirks in Schwab’s Large-Cap Value ETF
SCHV•The Schwab U.S. Large-Cap Value ETF unexpectedly added SpaceX, a private company with negative earnings, to its holdings using Dow Jones’ six-factor screening methodology. The inclusion highlights how earnings yield and price/book rules can misclassify loss-making IPOs as value stocks.
1. Unexpected SpaceX Inclusion
The Schwab U.S. Large-Cap Value ETF added SpaceX, a private firm with no positive earnings and volatile P/E metrics, to its large-cap value index. This move surprised investors, as SpaceX typically falls outside traditional value categories due to its growth profile and lack of public earnings data.
2. Six-Factor Screening Criteria
Schwab’s index follows a Dow Jones methodology assessing projected earnings yield, projected earnings growth, price/book, trailing dividend yield, trailing revenue growth and trailing earnings growth. Sparse or negative data points on SpaceX’s S-1 filings may have skewed E/P and price/book ratios, causing the company to register as a top value candidate.
3. Implications for SCHV Investors
The misalignment between SpaceX’s growth stage and its value classification raises concerns about index accuracy and ETF risk profiles. Investors may see unexpected volatility in holdings if other loss-making IPOs slip into the fund under similar screening quirks.
