Key Takeaways
SpaceX’s initial public offering documents reveal a governance structure that gives founder Elon Musk near-total control, concentrating 83.8 percent of voting power with him and other insiders in a move that sharply curtails shareholder rights.
"It closes the voting door, the courthouse door and the proposal door simultaneously. It’s unprecedented in terms of creating a total lack of accountability,” said Bruce Herbert, CEO of Newground Social Investment, a wealth management firm that has previously challenged Musk on governance at Tesla.
Excerpts of the filing show SpaceX is using a combination of dual-class super-voting shares, mandatory arbitration, and business-friendly Texas corporate law to insulate management. The structure effectively gives Musk veto power over his own removal and limits investors’ ability to challenge the company in court. The rocket maker is reportedly targeting a valuation of up to $1.75 trillion in an offering that could raise $75 billion later this year.
For investors, the IPO presents a stark trade-off: a chance to buy into one of history’s most anticipated public companies against an almost complete surrender of corporate oversight. The terms, which experts call highly unusual, could set a new precedent for founder-led technology companies, including artificial-intelligence firms Anthropic and OpenAI.
At the heart of Musk’s control is a dual-class equity system. Public investors will be offered Class A shares with one vote each, while Musk and other insiders will hold Class B shares that carry 10 votes per share. According to the May 4 filing, this structure will give Musk 42.5% of the company’s equity but 83.8% of its voting power.
Crucially, the bylaws state that Musk “can only be removed from our board or these positions by the vote of Class B holders.” Since he will control this class of stock, the only person who can fire Elon Musk is Musk himself.
“Usually removal of the CEO is a decision left to the board, and controllers rely on their power to replace the board,” Lucian Bebchuk, a Harvard Law School professor focused on corporate governance, told Reuters. SpaceX’s provision goes a step further by tying removal directly to votes Musk controls.
The company’s decision to incorporate in Texas in 2024, moving from Delaware, provides an additional layer of protection. The move followed a Delaware court ruling that voided Musk’s $56 billion Tesla pay package—a decision later reversed. Texas business law offers more flexibility on governance and makes it harder for shareholders to launch proxy contests or remove directors.
SpaceX’s bylaws will require shareholders to waive their right to a jury trial and prohibit them from bringing class-action lawsuits against the company or its directors. Instead, all disputes must be settled through mandatory arbitration, a private process that became permissible for public companies after a recent Securities and Exchange Commission policy shift.
Despite the restrictive terms, many investors may see them as the price of admission. The returns of Tesla, which has risen from its $17 debut in 2012 to around $389, provide a powerful incentive.
"I would rather have him making these decisions and be in control," said Joel Shulman, founder of ERShares and a SpaceX investor. "He may be controversial and polarizing and he does some crazy, bizarre things sometimes, but he’s a brilliant guy when it comes to building something completely new and building wealth.”
This article is for informational purposes only and does not constitute investment advice.
