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Elon Musk has incredible sway over the companies he leads. And while he already calls himself \u201cTechnoKing\u201d 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.\u00a0<\/p>\n
Musk\u2019s monarchical grip on SpaceX was finally laid bare in the company\u2019s IPO filing made public on Wednesday<\/a>.\u00a0\u00a0<\/p>\n Post-IPO, Musk will be CEO, CTO, and chairman of SpaceX\u2019s 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.\u00a0\u00a0<\/p>\n 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 \u2013 an environment Musk helped create when he loudly moved Tesla\u2019s incorporation there from Delaware.\u00a0<\/p>\n As SpaceX bluntly tells prospective investors in the filing: \u201cThis will limit or preclude your ability to influence corporate matters and the election of our directors.\u201d\u00a0<\/p>\n 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.\u00a0<\/p>\n But Musk and SpaceX are taking things much further, according to Ann Lipton, professor of law at the University of Colorado.\u00a0<\/p>\n Lipton argued, in a blog<\/a> published last Friday, that Musk is obliterating the three most powerful levers that shareholders can typically pull to pressure a public company\u2019s top executive.\u00a0<\/p>\n The first is voting. SpaceX uses a dual-class structure, with Musk holding 93.6% of the Class B super-voting shares that won\u2019t be available to the public in the offering.\u00a0\u00a0<\/p>\n 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 \u201ccontrolled company\u201d by stock exchange standards, and controlled companies are allowed to exempt themselves from rules requiring independent oversight.\u00a0<\/p>\n SpaceX states in its IPO filing that regular shareholderss (who will own Class A shares) \u201cwill not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.\u201d\u00a0<\/p>\n Crucially, Musk\u2019s 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\u2019t need to convince SpaceX shareholders.\u00a0\u00a0<\/p>\n Voting control is the biggest difference between Musk\u2019s 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 \u2013 including, at one point, threatening to leave altogether \u2013 to be granted more stock. (Tesla obliged last year by concocting a $1 trillion compensation package approved by shareholders.)\u00a0\u00a0<\/p>\n The second lever SpaceX is curtailing is the ability to sue.\u00a0<\/p>\n By incorporating in Texas, SpaceX has ensured shareholders can\u2019t file what\u2019s known as a \u201cderivative suit\u201d unless they own at least 3% of the company\u2019s shares. (At the expected $1.75 trillion valuation, that would amount to a position worth roughly $52 billion.)\u00a0\u00a0<\/p>\n Derivative suits occur when shareholders sue a company\u2019s directors on behalf of the company itself \u2013 like when a small shareholder sued Tesla\u2019s board over the $56 billion pay package awarded to Musk in 2018.\u00a0\u00a0<\/p>\n What\u2019s 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.\u00a0<\/p>\n In other words, Lipton told TechCrunch: \u201cForget it, that\u2019s it. There isn\u2019t going to be a lawsuit\u201d in most cases.\u00a0<\/p>\n This wasn\u2019t the case prior to Musk ripping Tesla out of Delaware and moving it to Texas, she said.\u00a0\u00a0<\/p>\n In fact, Lipton said that up until a few years ago, Delaware was increasingly scrutinizing the exact kind of controlled company SpaceX has become.\u00a0\u00a0<\/p>\n \u201cYou 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,\u201d she said.\u00a0<\/p>\n The final lever of shareholder power that SpaceX has broken, Lipton argued, is the ability to sell shares and walk away.\u00a0<\/p>\n SpaceX has successfully lobbied the Nasdaq stock exchange to loosen rules governing how and when it adds companies to its Nasdaq 100 index \u2013 a group of large-cap companies that it bills as \u201cfundamentally sound and innovative.\u201d\u00a0<\/p>\n That process used to take months, but now it\u2019s expected that SpaceX will be added to the list in a matter of weeks.\u00a0\u00a0<\/p>\n 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).\u00a0\u00a0<\/p>\n Therefore, Lipton argues SpaceX\u2019s 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.\u00a0\u00a0<\/p>\n \u201cNormally, if you can\u2019t vote, and you can\u2019t sue, you can at least sell and drive down the price, and that hurts,\u201d Lipton said. \u201cIt hurts the controller [of the company], it hurts executives who are paid in stock. But now even that is being manipulated.\u201d\u00a0<\/p>\n 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.\u00a0\u00a0<\/p>\n But, he told TechCrunch, shareholders will still be able to \u201cvote with their feet\u201d and sell their stock \u2013 it just may not have the same impact.\u00a0<\/p>\n \u201cYou don\u2019t have to buy, and if you have it, and if you don\u2019t like it, you can sell,\u201d he said.\u00a0<\/p>\n On top of this control, Musk stands to make a historically anomalous amount of money from SpaceX going forward.\u00a0\u00a0<\/p>\n Not only will the IPO likely make him the world\u2019s first trillionaire, he was granted a compensation package consisting of 1 billion Class B shares.\u00a0<\/p>\n Those shares don\u2019t vest until Musk makes the company worth $7.5 trillion and, crucially, accomplishes the \u201cestablishment of a permanent human colony on Mars with at least one million inhabitants.\u201d\u00a0\u00a0<\/p>\n But while the \u201cMars colony\u201d 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.\u00a0<\/p>\n In the stock award agreement attached to the IPO filing, SpaceX reveals that Musk can vote with these shares even before they vest. What\u2019s more, he can also pledge them as collateral for loans. It\u2019s a popular move for the ultra-rich to get access to lots of cash without being taxed on unrealized gains, and it\u2019s something Musk has often done in the past with his shares of SpaceX and Tesla.\u00a0\u00a0<\/p>\n While borrowing against these Mars colony shares technically requires board approval, Musk controls the board. Ultimately, the decision will be up to him.\u00a0<\/p>\n These incredibly valuable shares become normal common stock if and when Musk sells them.\u00a0\u00a0<\/p>\n But there is one notable exception. Musk can place them in trusts to retain their super-voting status, meaning it\u2019s possible that the king of SpaceX \u2013 who has at least 14 children that we know of \u2013 is positioning himself to create dynastic control.\u00a0<\/p>\n<\/div>\n When you purchase through links in our articles, we may earn a small commission<\/a>. This doesn\u2019t affect our editorial independence.<\/em><\/p>\nMore control than Mark<\/strong><\/h2>\n
A legal shield<\/strong>\u00a0<\/h2>\n
Vote with your feet<\/strong><\/h2>\n
All the money<\/strong>\u00a0<\/h2>\n