Scorned by his time helming Tesla, Elon Musk went a long way to ensure he’s not at the mercy of SpaceX shareholders.
On Wednesday, Musk’s SpaceX kicked off its public journey as a listed company, publishing the S-1 paperwork required for its highly anticipated IPO.
Throughout the document, the company detailed all the ways it differs from a traditional public company and how influence would remain with Musk, who holds over 85% of voting power.
1. Control of the board
The hotly awaited filing said that Musk will serve as the company’s CEO, chief technical officer, and chairman of its board and will control the election of SpaceX’s board of directors.
“As the holder of a majority of our outstanding shares of Class B common stock, Mr. Musk will be able to elect, remove or fill any vacancy among the Class B Directors,” Wednesday’s filing read.
Founders want control over their board of directors because it makes key decisions about the company, including the power to fire the CEO, decide their compensation, and decide whether to sell the company.
In 2018, Musk stepped down as Tesla’s chair after the Securities and Exchange Commission charged him with misleading investors by tweeting that he was considering taking the company private. The SEC suit said that the announcement, with no factual details, created chaos and hurt investors. Musk paid $20 million to settle the suit.
On a July Tesla earnings call, Musk said that while he wants more ownership of Tesla, he doesn’t want so much control that the board can’t fire him if he goes “crazy.”
2. Dual stock classes
SpaceX will offer two classes of stock, a move that creates a tier of shares for insiders and gives them greater voting power than the general public.
“Our dual class structure concentrates voting control with Mr. Musk and other holders of our Class B common stock,” SpaceX wrote in the filing. “This will limit or preclude your ability to influence corporate matters and the election of our directors.”
That’s a lesson Musk likely learned from Tesla, which offers a single share class. He directly owns about 13% of the electric vehicle maker, and his voting control, until recently, was about 13%, meaning shareholders made key decisions about his compensation.
Last year, Tesla shareholders voted to approve a $1 trillion pay package for Musk, acceding to demands he has been making since 2024. The pay package included additional shares that could increase his ownership from 13% to about 25%.
“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned,” Musk wrote on X in early 2024. “Unless that is the case, I would prefer to build products outside of Tesla.”
Meta is among the companies that follow a dual share class structure. Its Class B shares are held mostly by CEO Mark Zuckerberg and a few early insiders, which means Zuckerberg owns about 13% of Meta but controls 60% of the voting power.
3. Controlled company
Musk’s rights over the board and stock made it clear that SpaceX won’t be like other public companies. Instead, it will operate as a “controlled company.”
This exempts SpaceX from rules requiring that most of its board be independent directors. The company also does not have to establish independent compensation and nominating committees, it said in the filing. It will still need an audit committee composed entirely of independent directors.
Examples of controlled companies include Walmart, Google, Ford, and Meta. The structure is designed to protect the company from hostile takeovers and short-term activist pressure.
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