Officials from three major U.S. public pension funds are raising alarm bells about SpaceX’s planned corporate governance structure, calling it “extreme” and urging changes before the company’s anticipated public stock offering.
In a letter sent Wednesday to SpaceX leadership, New York State Comptroller Thomas DiNapoli, New York City Comptroller Mark Levine, and California Public Employees’ Retirement System CEO Marcie Frost expressed strong objections to the company’s proposed setup.
“We are writing to express our serious concerns with the reported novel and extreme governance structure and provisions SpaceX is planning to disclose in its registration statement,” the officials wrote in their correspondence to Musk, which Reuters obtained.
The three pension leaders – who manage retirement funds representing some of the nation’s largest public pension systems – took issue with the extensive authority granted to Musk within the company’s structure. Their concerns include his voting control over company stock, his ability to veto his own removal as CEO, and various litigation protections, including required arbitration for shareholder disputes.
SpaceX’s public debut is projected to become the largest initial public offering on record, with the company seeking to raise $75 billion and achieve a $1.75 trillion market value.
The pension officials described the proposed structure as potentially “the most management-favorable governance structure ever brought to the U.S. public markets at this scale.” Their letter referenced reporting from Reuters and other news outlets about SpaceX’s confidential filing with securities regulators.
The letter also highlighted concerns about Musk’s involvement across multiple companies. His leadership roles at Tesla, X, xAI, the Boring Company and Neuralink, along with substantial compensation arrangements at SpaceX and Tesla, create a situation where these companies are “in the unusual position of essentially competing against one another” for his attention and focus.
“Long-term shareholders, under the reported governance structure, will have no independent board majority, no functioning derivative remedy and no entitlement to true judicial review through which to address the conflicts that this concentration of roles will inevitably produce,” the pension leaders stated.
These same officials have previously raised similar concerns about insider influence at other publicly traded companies, including Meta Platforms and Tesla.
SpaceX has not responded to requests for comment on the matter.
According to Reuters reporting, SpaceX has requested early inclusion in the Nasdaq 100 index, which could set a precedent for other technology companies with concentrated insider control.
Should SpaceX gain admission to major stock indexes, the New York and California pension systems would automatically acquire shares through their passive investment allocations.
The letter outlined numerous governance concerns beyond the dual-class share structure. Under the reported arrangement, Musk could only be removed from his CEO or chairman positions through a vote by Class B shareholders – votes he controls through his super-voting shares.
SpaceX also intends to adopt controlled-company status, which would allow it to avoid requirements for a majority-independent board or independent compensation and nominating committees while Musk serves in his multiple executive roles.
Additionally, the company has moved its incorporation to Texas, where recent legislation permits companies to require shareholders to own up to 3% of outstanding stock before pursuing derivative lawsuits. Given SpaceX’s expected valuation, this threshold would require billions of dollars in holdings – an amount likely only achievable by Musk himself, according to the pension officials.
SpaceX would also break new ground as the first major U.S. company to mandate arbitration for shareholder claims under federal securities laws within its corporate documents, removing the class-action options typically available to investors.
The pension leaders referenced Musk’s regulatory track record as part of their evaluation, including his 2018 SEC settlement regarding “funding secured” social media posts and a proposed $1.5 million settlement reached in May addressing allegations he failed to properly disclose his Twitter investment in 2022. They also mentioned a March jury decision finding him liable for defrauding Twitter shareholders during the acquisition, which Musk is currently appealing.
The letter raised additional concerns about transactions between related parties, noting SpaceX’s reported all-stock purchase of xAI in February and Tesla’s reported $2 billion investment in SpaceX during the first quarter – deals completed before SpaceX had public shareholders or an independent review process.
Combined, DiNapoli, Frost and Levine oversee retirement systems managing more than $1 trillion in assets.
In their correspondence, the pension leaders recommended several changes: implementing one-share, one-vote policies or establishing sunset provisions for super-voting shares within seven years; creating a majority-independent board and separating CEO and chairman roles; removing provisions that protect Musk from termination without his consent; eliminating mandatory arbitration; and requiring independent approval for related-party transactions involving Musk’s other companies.
“Precisely because SpaceX is poised to occupy a position of systemic importance in the public markets, and to become, through index inclusion, an unavoidable holding in our portfolios, its governance must at least adhere to the baseline protections upon which long-term institutional capital depends, rather than seeking to diminish them,” they concluded.
The three officials have requested a meeting with Musk and his advisers to discuss their concerns.
