Exclusive-New York, California pension leaders oppose SpaceX’s ‘excessive’ control structure
Written by Ross Kerber
BOSTON, May 13 (Reuters) – Leaders of the three largest U.S. government pension plans say they are deeply concerned about the “excessive” ownership and control of SpaceX in its upcoming stock listing, urging founder and CEO Elon Musk to remove provisions that would limit shareholder protections.
“We are writing to express our deep concern about the reported novel and excessive management structure and provisions that SpaceX plans to disclose in its registration statement,” New York State Governor Thomas DiNapoli, New York City Administrator Mark Levine and California Public Employees’ Retirement System Administrator Marcie Frost said in a letter sent Wednesday to Musk that was reviewed by Reuters.
Officials — who represent three of the top four public pension plans in the US — disputed the amount of power the board has given Musk over the company, including voting control over stock, veto power over his removal as CEO, and protections from the courts, including mandatory arbitration of claims by SpaceX shareholders.
The listing of SpaceX is expected to be the first major public offering in history, the company is looking to raise 75 billion dollars, at a cost of $ 1.75 trillion.
ADVANTAGES OF A BUILDING THAT WE LIKE TO MANAGE
The IPO “will create the most favorable management structure ever brought to the US public markets at this time,” they wrote in a letter to Musk, SpaceX President Gwynne Shotwell, and SpaceX Chief Financial Officer Bret Johnsen, citing reports by Reuters and other media organizations about the company’s confidential registration statement filed with securities regulators.
Pension leaders have also flagged Musk’s growing corporate empire as a potential problem. His simultaneous leadership of Tesla, X, xAI, the Boring Company and Neuralink — combined with multi-year compensation packages at SpaceX and Tesla — puts the latter two companies “in the unusual position of fundamentally competing” for his time and attention, they wrote.
“The long-term shareholders, under the reported management structure, will not have a majority of the independent board, There is no the availability of other active and they will not have the right to a true legal review with which the conflict that will inevitably be produced by this group will be dealt with,” they wrote.
All three have complained about insider influence at publicly traded companies such as Meta Platforms and Musk’s electric car company Tesla.
SpaceX representatives did not respond to questions.
REDOING SECONDS
SpaceX has sought early inclusion in the Nasdaq 100 index, Reuters reports, which could signal the addition of other large technology companies with strong insider control.
The pension systems of New York and California will own SpaceX shares through their passive shares if the company is admitted to major US stock indexes.
The book details the red flags of dominance over two-tier stocks. Under the proposed structure, Musk can only be removed as CEO or chairman by a vote of Class B shareholders — votes he controls through his top-voting shares.
SpaceX also plans to adopt controlled company status, allowing it to bypass requirements for an independent board majority or independent compensation and nominating committees, while Musk serves as CEO, chief technology officer and chairman.
The company was also incorporated in Texas, where new laws allow companies to require shareholders to hold up to 3% of outstanding stock to pursue lawsuits. At SpaceX’s proposed rate, that would require billions of dollars in holdings — a threshold likely only Musk could meet, pension officials said.
SpaceX will also be the first major U.S. company to include mandatory arbitration of shareholder claims arising under federal securities laws in its governing documents, removing a layer structure commonly found by investors, according to the letter.
MUSK’S MANAGEMENT HISTORY IS HIGHLIGHTED
Pension leaders cited Musk’s regulatory history as key to their assessment, including his 2018 settlement with the SEC over “sponsorship” tweets and a proposed $1.5 million settlement in May to settle allegations he failed to disclose early on his 2022 Twitter account. discovery process, which Musk is fascinated by.
The letter also raised concerns about group-related transactions, noting that SpaceX reported the acquisition of all xAI stock in February and Tesla reported a $2 billion investment in SpaceX in the first quarter — deals completed before SpaceX had public shareholders or an independent committee process.
Together DiNapoli, Frost and Levine oversee systems with more than $1 trillion in retirement assets.
In their letter, the pension leaders urged SpaceX to accept one share, one vote or the sunset of the highest voting shares within seven years; install an independent majority board and separate the roles of CEO and chairman; eliminating provisions protecting Musk from termination without his consent; the key to the required decision; and requires independent approval of group transactions related to Musk’s other companies.
“Because SpaceX is ready to take an important position in the public markets, and in order to, through the inclusion of the index, an inevitable holding in our portfolios, its governance should at least be consistent with the protection of the fundamentals on which long-term institutional capital depends, rather than seek to reduce it,” they wrote.
The three officials requested a meeting with Musk and his advisers to discuss the concerns.
(Reporting by Ross Kerber. Editing by Dawn Kopecki and Sonali Paul.)
