SpaceX publicly filed its initial public offering paperwork with the Securities and Exchange Commission, or SEC, last week.
If the SEC approves it, the public offering will lock in Elon Musk’s control over SpaceX and curtail the rights of regular shareholders, Natalia Renta, associate director of corporate governance and power at the Americans for Financial Reform Education Fund, an advocacy group, said in a statement.
Retna said SpaceX is proposing a dual class share structure, strict restrictions on lawsuits, and drastic limitations on shareholders’ ability to bring important issues to the attention of Musk and the rest of the company’s management.
“Musk is pushing the boundaries of how much power one person can have over a public company,” she said. “The Trump administration’s SEC and Texas lawmakers have facilitated this power grab, bending over backwards to rig the rules in ways that benefit Musk at the expense of everyone else.”
Retna said Musk has a history of self-serving behavior, including giving himself loans at terms much more favorable than market rates; making grandiose promises about future achievements that haven’t come to pass; making misleading statements; and siphoning off resources from one of his companies to another.
“Musk’s long record of self-serving behavior perfectly exemplifies why it is dangerous to insulate CEOs from accountability,” she said. “Musk has routinely put his interests above those of his companies’ shareholders, workers, and affected communities. Now there will be little recourse, if any, if this pattern of behavior continues or becomes even more extreme due to fewer checks.”
Many retirement savers can expect to be exposed to SpaceX quickly even if they don’t directly buy its shares, as the NASDAQ recently changed its rules to allow the NASDAQ 100 index to fast-track inclusion of recently-public large companies and relaxed other standards, Retna said. SpaceX can now be included in the index as quickly as 15 days after trading begins instead of about three months.
The S&P is also considering changing its index standards that would allow SpaceX to be included in various indices – including the S&P 500 – six months after trading begins. FTSE Russell is also considering making similar changes.
“This IPO is poised to benefit early investors by allowing them to cash out at an arguably inflated share price,” said Renta. “The corresponding reality is that regular investors, including workers saving for retirement, are likely to end up holding the bag by being exposed to index funds that buy SpaceX shares soon after the public offering and before the market has had a meaningful chance to properly price them.”
