Leaders of three of the biggest US public pension systems said they have major concerns over SpaceX's "extreme" ownership and control set-up in its upcoming public stock listing, urging founder and CEO Elon Musk to remove provisions that would curb shareholder protections.
"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," New York State Comptroller Thomas DiNapoli, New York City Comptroller Mark Levine and California Public Employees' Retirement System CEO Marcie Frost said in a letter sent Wednesday to Musk that was reviewed by Reuters.
The officials - representing three of the top four largest public pension plans in the US - objected to the amount of power the board has given Musk over the company, including voting control over the stock, veto power over his own removal as CEO, and protections from litigation, including mandatory arbitration for SpaceX shareholder claims.
The SpaceX listing is expected to be the biggest initial public offering in history, with the company looking to raise $75 billion, with a $1.75 trillion valuation.
Objections to management favourable structure
The IPO "would constitute the most management-favorable governance structure ever brought to the US public markets at this scale," they wrote in the letter addressed to Musk, SpaceX President Gwynne Shotwell, and SpaceX chief financial officer Bret Johnsen, citing reporting by Reuters and other media organisations on the company's confidential registration statement filed with securities regulators.
The pension leaders also flagged Musk's sprawling corporate empire as a potential problem. His simultaneous leadership of Tesla, X, xAI, the Boring Company and Neuralink - combined with extraordinary multi-year compensation packages at SpaceX and Tesla - puts the latter two companies "in the unusual position of essentially competing against one another" for his time and attention, they wrote.
"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," they wrote.
The three have previously complained about the influence of insiders at publicly-traded companies such as Meta Platforms and Musk's electric car company Tesla.
SpaceX representatives did not respond to questions.
Remaking the indexes
SpaceX has sought early inclusion into the Nasdaq 100 index, Reuters has reported, which could presage the addition of other major tech companies with strong control by insiders.
The New York and California pension systems would become holders of SpaceX shares through their passive allocations if the company is admitted to major US stock indexes.
The letter detailed multiple governance red flags beyond dual-class shares. Under the reported structure, Musk could only be removed as CEO or chair by a vote of Class B shareholders - votes he himself controls through his super-voting shares.
SpaceX also plans to adopt controlled-company status, allowing it to bypass requirements for a majority-independent board or independent compensation and nominating committees, while Musk serves as CEO, chief technology officer and chair.
The company has also reincorporated in Texas, where new laws allow companies to require shareholders to hold up to 3% of outstanding stock to pursue derivative litigation. At SpaceX's projected valuation, that would require billions of dollars in holdings - a threshold likely only Musk himself could meet, the pension officials said.
SpaceX would also be the first major US company to include mandatory arbitration for shareholder claims arising under federal securities laws in its governing documents, eliminating the class-action structure typically available to investors, according to the letter.
Musk's regulatory history highlighted
The pension leaders cited Musk's regulatory history as relevant to their assessment, including his 2018 SEC settlement over "funding secured" tweets and a proposed $1.5 million settlement reached in May to resolve allegations he failed to timely disclose his Twitter stake in 2022. They also noted a March jury verdict finding him liable for defrauding Twitter shareholders during the acquisition process, which Musk is appealing.
The letter also raised concerns about related-party transactions, noting SpaceX's reported all-stock acquisition of xAI in February and Tesla's reported $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 adopt one-share, one-vote or sunset super-voting shares within seven years; install a majority-independent board and separate the CEO and chair roles; eliminate provisions protecting Musk from termination without his approval; scrap mandatory arbitration; and require independent approval of related-party transactions with 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 wrote.
The three officials requested a meeting with Musk and his advisers to discuss the concerns.
