BOSTON, May 13
Leaders of the three largest public pension plans in the U.S. have voiced significant worries regarding SpaceX’s ownership and control structure as it prepares for its public offering. They’ve urged founder and CEO Elon Musk to eliminate terms that could limit shareholder protections.
In a letter to Musk, New York State Comptroller Thomas DiNapoli, New York City Comptroller Mark Levine, and California Public Employees Retirement System CEO Marcy Frost expressed their serious concerns about SpaceX’s governance approach, which they dubbed “novel and extreme.”
The pension officials highlighted the excessive power that Musk possesses, such as his ability to vote shares, veto the firing of his CEO, and enjoy protections against lawsuits that would require arbitration for shareholder claims.
SpaceX is expected to have the largest IPO in history, aiming to raise $75 billion with a valuation of around $1.75 trillion.
They emphasized that the upcoming IPO appears to introduce a governance structure unmatched in its favorability toward management within the U.S. public markets. This was highlighted in their correspondence with Musk, SpaceX President Gwynne Shotwell, and Chief Financial Officer Brett Johnsen, citing reports regarding the company’s confidential registration with securities regulators.
Moreover, pension leaders pointed out that Musk’s various responsibilities across his ventures—like Tesla, X, xAI, The Boring Company, and Neuralink—might pose challenges to SpaceX’s operational focus. They noted that this concentration of roles could effectively pit SpaceX against Tesla when it comes to Musk’s attention.
They stated that long-term shareholders would be left without a majority-independent board, few remedial options, and no real judicial review to address the conflicts produced by Musk’s concentrated power.
It’s worth noting that these leaders have previously raised alarms about insider dominance at publicly traded firms, including Musk’s companies.
SpaceX has not yet replied to inquiries regarding these issues.
According to reports, the company is seeking early entry into the Nasdaq 100 index, which could pave the way for other tech giants with strong insider governance. If accepted into major stock indexes, pension funds in New York and California might end up holding SpaceX shares through passive investment allocations.
Additionally, the correspondence outlined numerous governance issues beyond dual-class shares. For instance, under the proposed structure, Musk can only be removed as CEO or chairman through a Class B shareholder vote, which he controls with his super-voting shares.
SpaceX is also planning to adopt a controlled company status, which would exempt it from requiring a majority-independent board or independent committees while Musk holds multiple roles.
Additionally, the company has shifted its incorporation to Texas, where a new law mandates that shareholders own a minimum of 3% of outstanding stock to file derivative lawsuits—a threshold that may only Musk could meet given SpaceX’s high valuation.
Furthermore, SpaceX plans to introduce mandatory arbitration for shareholder claims related to federal securities laws, effectively removing class action rights that investors typically rely on.
Pension leaders referenced Musk’s past regulatory challenges, such as his 2018 SEC settlement over his tweets regarding funding and a recent $1.5 million settlement regarding disclosure delays. There was also a jury ruling that found Musk liable for defrauding Twitter shareholders, which he is currently appealing.
They brought up concerns about transactions with related parties, noting SpaceX’s all-stock acquisition of xAI and Tesla’s $2 billion investment in SpaceX, which occurred before undergoing any public or independent review.
DiNapoli, Frost, and Levine manage funds amounting to over $1 trillion in retirement assets and have urged SpaceX to establish a one-share, one-vote policy, ensure independent board governance, separate the roles of CEO and chairman, and eliminate any clause that shields Musk from being dismissed without consent. They also stressed the need for independent approval for Musk’s related-party deals.
They concluded that since SpaceX is increasingly critical to the public markets and poised for inclusion in major indexes, its governance should prioritize protecting its long-term institutional capital rather than reducing it.
The three officials have requested a meeting with Musk and his team to discuss these pressing concerns.
