SpaceX’s plan to go public will reportedly give CEO Elon Musk “virtually unchecked executive authority” and limit the rights of shareholders to sue the company. The plan, reported by Reuters today, could prevent shareholder lawsuits like the one that held up a lucrative Musk pay package at Tesla.
“Excerpts of SpaceX’s IPO registration statement reviewed by Reuters show the company is combining supervoting shares, mandatory arbitration, stricter rules on shareholder proposals and Texas corporate law to give Musk and other insiders broad control,” Reuters wrote. “At the same time, it sharply limits investors’ ability to challenge management, sue in court and force votes on governance issues.”
Reuters said the policies “will erode typical shareholder protections in unprecedented ways,” and “the only person who can fire Musk is Musk, who will retain majority control through supervoting shares.”
SpaceX reportedly plans to enforce a mandatory arbitration clause, taking advantage of a September 2025 policy statement issued by the Securities and Exchange Commission. The SEC’s new position is that mandatory arbitration provisions are not inconsistent with federal securities laws.
The SpaceX IPO will prevent shareholder lawsuits by “mak[ing] it clear that anyone who owns shares ‘irrevocably and unconditionally’ waives all rights to pursue a jury trial,” Reuters wrote. “Shareholders will also be prohibited from bringing class actions against the company, its directors, officers, controlling shareholders or bankers tied to the IPO, according to the filing.”
Musk will reportedly have the power to “elect, remove or fill any vacancy” on the board of directors, and “the power to control other issues requiring shareholder approval, including M&A transactions, potentially making it easier to merge with Tesla later if he wants,” Reuters wrote. He currently owns 42.5 percent of SpaceX’s equity, has 83.8 percent of the voting control, and will maintain over 50 percent of the voting power after it goes public, the article said.
Musk’s majority control via supervoting shares will make SpaceX a “controlled company” under securities rules, meaning it won’t have to follow the typical requirement to have independent directors form a majority of the nominating and compensation committees, Reuters wrote. Musk is slated to be both the CEO and board chairman.
The benefits of Texas
SpaceX’s IPO filing is confidential, allowing the firm to move forward without yet revealing detailed financial information. We contacted SpaceX about the Reuters report today and will update this article if it provides a response.
Bruce Herbert, CEO of Newground Social Investment, told Reuters that the plan “closes the voting door, the courthouse door and the proposal door simultaneously. It’s unprecedented in terms of creating a total lack of accountability.” Newground previously tried to prevent Tesla from using a Texas law that bars investors from filing shareholder resolutions unless they own at least $1 million of stock.
In a January 2024 ruling against Tesla, a Delaware judge overseeing a shareholder lawsuit voided Musk’s $55.8 billion pay package, finding that most of Tesla’s board members were beholden to Musk or had compromising conflicts. The ruling prompted Tesla to move its corporate headquarters to Texas. Tesla subsequently awarded Musk a compensation plan that could pay him more than $1 trillion over a decade, and the Delaware Supreme Court reinstated Musk’s original pay package.
SpaceX also relocated to Texas. The space firm’s IPO filing takes advantage of “largely untested new governance laws” to limit shareholder rights, Reuters wrote.
“The Texas incorporation gives the company extra protection from activist investors and hostile takeovers. The state’s securities laws also make it harder for challengers to make an unsolicited tender offer, run a proxy contest or remove officers, directors and management,” the article said.
Although the SpaceX IPO appears to be unusually restrictive, investors are likely to buy in. It is expected to be the largest IPO in history, with SpaceX reportedly aiming to raise as much as $75 billion at a valuation of more than $2 trillion.
