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SpaceX IPO Structure Gives Elon Musk Stronger Control

Prime Highlights

  • Elon Musk will retain majority voting control of SpaceX through supervoting shares after the IPO.
  • The company’s governance structure limits shareholder lawsuits, proposals and voting influence

Key Facts

  • SpaceX is targeting up to $75 billion in IPO proceeds at a reported valuation of nearly $1.75 trillion.
  • Tesla CEO Elon Musk currently holds 83.8% voting control in SpaceX.

Background

SpaceX is preparing for its public listing later this year with a corporate structure that gives founder Elon Musk broad control over the company while reducing shareholder influence and legal rights.

According to the company’s IPO filing, SpaceX will use a dual-class share structure that grants Class B shareholders 10 votes for every Class A share sold to public investors. Musk currently controls 42.5% of the company’s equity and 83.8% of voting power. The structure will allow him to retain majority control after the listing and continue serving as chief executive officer, chief technology officer and chairman.

The filing also showed that shareholders will face stricter rules on lawsuits and governance proposals. Investors will waive the right to jury trials and class-action lawsuits and instead use mandatory arbitration for disputes. Shareholders will also need to hold at least $1 million worth of stock, or 3% ownership, to push proposals to a vote under Texas corporate law.

The company moved its incorporation from Delaware to Texas last year after legal disputes involving Musk’s compensation package at Tesla. Experts said the Texas structure offers stronger protection against activist investors and hostile takeovers.

Despite concerns from governance experts, many investors are expected to participate in the IPO because of SpaceX’s strong growth potential. The company is reportedly targeting up to $75 billion in proceeds and a valuation of around $1.75 trillion, which could make it one of the largest public offerings in history.

Some analysts have raised the warning that such a setup will enable future founder-led tech IPOs, perhaps more specifically, in the artificial intelligence sector.