Elon Musk has incredible sway over the companies he leads. And while he already calls himself “TechnoKing” at Tesla, he is a real ruler over SpaceX, wielding an unprecedented level of control over one of the most valuable companies in the world.
Musk’s monarchical grip on SpaceX was finally laid bare in the company’s IPO filing made public on Wednesday.
Post-IPO, Musk will be CEO, CTO, and chairman of SpaceX’s board. His current 85% voting power will drop following the IPO, but it will still be above 50%, giving him the ability to appoint directors as he sees fit. He essentially cannot be fired.
The company has placed limits on how shareholders can file legal challenges, and it will benefit from a far more permissive regulatory regime in Texas, its home state – an environment Musk helped create when he loudly moved Tesla’s incorporation there from Delaware.
As SpaceX bluntly tells prospective investors in the filing: “This will limit or preclude your ability to influence corporate matters and the election of our directors.”
More control than Mark
Tech founders have enjoyed increased control over public companies over the last two decades, especially as Google, Meta (then Facebook) and other tech firms went public with dual-class shares.
But Musk and SpaceX are taking things much further, according to Ann Lipton, professor of law at the University of Colorado.
Lipton argued, in a blog published last Friday, that Musk is obliterating the three most powerful levers that shareholders can typically pull to pressure a public company’s top executive.
The first is voting. SpaceX uses a dual-class structure, with Musk holding 93.6% of the Class B super-voting shares that won’t be available to the public in the offering.
Despite aiming to become the largest IPO in history, Musk will still hold more than 50% of the voting power once SpaceX lists. That makes it a “controlled company” by stock exchange standards, and controlled companies are allowed to exempt themselves from rules requiring independent oversight.
SpaceX states in its IPO filing that regular shareholderss (who will own Class A shares) “will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.”
Crucially, Musk’s voting control means he will be able to decide anything requiring shareholder approval. That includes decisions such as mergers and acquisitions. If Musk eventually wants to somehow merge with or acquire Tesla, as many people have speculated, he won’t need to convince SpaceX shareholders.
Voting control is the biggest difference between Musk’s power at SpaceX versus Tesla. Musk only has around 20% voting control at Tesla and has had to put tremendous pressure on the company in recent years – including, at one point, threatening to leave altogether – to be granted more stock. (Tesla obliged last year by concocting a $1 trillion compensation package approved by shareholders.)
A legal shield
The second lever SpaceX is curtailing is the ability to sue.
By incorporating in Texas, SpaceX has ensured shareholders can’t file what’s known as a “derivative suit” unless they own at least 3% of the company’s shares. (At the expected $1.75 trillion valuation, that would amount to a position worth roughly $52 billion.)
Derivative suits occur when shareholders sue a company’s directors on behalf of the company itself – like when a small shareholder sued Tesla’s board over the $56 billion pay package awarded to Musk in 2018.
What’s more, SpaceX has included language in its bylaws, funneling most lawsuits to either the new Texas Business Court, which only started operating in 2024, or through mandatory arbitration.
In other words, Lipton told TechCrunch: “Forget it, that’s it. There isn’t going to be a lawsuit” in most cases.
This wasn’t the case prior to Musk ripping Tesla out of Delaware and moving it to Texas, she said.
In fact, Lipton said that up until a few years ago, Delaware was increasingly scrutinizing the exact kind of controlled company SpaceX has become.
“You could have the dual-class shares, and that would give you outsized voting power, but it also meant that you were subject to a greater amount of oversight by the Delaware court system,” she said.
Vote with your feet
The final lever of shareholder power that SpaceX has broken, Lipton argued, is the ability to sell shares and walk away.
SpaceX has successfully lobbied the Nasdaq stock exchange to loosen rules governing how and when it adds companies to its Nasdaq 100 index – a group of large-cap companies that it bills as “fundamentally sound and innovative.”
That process used to take months, but now it’s expected that SpaceX will be added to the list in a matter of weeks.
When companies are added to these indexes like the Nasdaq 100 or S&P 500, they become automatic buys for large financial institutions (like 401k providers).
Therefore, Lipton argues SpaceX’s stock price will be buoyed in the early days of public trading by that impending inclusion, since traders will want to buy before institutional investors come in and drive the price up even higher.
“Normally, if you can’t vote, and you can’t sue, you can at least sell and drive down the price, and that hurts,” Lipton said. “It hurts the controller [of the company], it hurts executives who are paid in stock. But now even that is being manipulated.”
Chan Ahn, a former executive at Goldman Sachs and JPMorgan, and the current CEO of tokenized private equity company Tessera, said he broadly agrees that rapid inclusion in the Nasdaq 100 could drive the price higher.
But, he told TechCrunch, shareholders will still be able to “vote with their feet” and sell their stock – it just may not have the same impact.
“You don’t have to buy, and if you have it, and if you don’t like it, you can sell,” he said.
All the money
On top of this control, Musk stands to make a historically anomalous amount of money from SpaceX going forward.
Not only will the IPO likely make him the world’s first trillionaire, he was granted a compensation package consisting of 1 billion Class B shares.
Those shares don’t vest until Musk makes the company worth $7.5 trillion and, crucially, accomplishes the “establishment of a permanent human colony on Mars with at least one million inhabitants.”
But while the “Mars colony” requirement may make the package seem unobtainable to many, Musk can still extract a ton of value from these shares long before SpaceX ever reaches the red planet.
In the stock award agreement attached to the IPO filing, SpaceX reveals that Musk can vote with these shares even before they vest. What’s more, he can also pledge them as collateral for loans. It’s a popular move for the ultra-rich to get access to lots of cash without being taxed on unrealized gains, and it’s something Musk has often done in the past with his shares of SpaceX and Tesla.
While borrowing against these Mars colony shares technically requires board approval, Musk controls the board. Ultimately, the decision will be up to him.
These incredibly valuable shares become normal common stock if and when Musk sells them.
But there is one notable exception. Musk can place them in trusts to retain their super-voting status, meaning it’s possible that the king of SpaceX – who has at least 14 children that we know of – is positioning himself to create dynastic control.
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