What SpaceX’s IPO Filing Reveals About Musk’s Plan to Stay in Charge
In Focus
- SpaceX is adopting a dual-class share structure for its upcoming IPO
- Musk will hold more voting power among Class B shareholders
- Musk will have the power to veto any attempts to remove him as SpaceX CEO
SpaceX is signaling to prospective investors that independent directors won’t hold majority power on its board. A Reuters-reviewed excerpt from the company’s IPO filing shows that SpaceX founder Elon Musk will retain control over the rocket and AI company as its CEO and board chair.
Musk Holds More Power Among Class B Shareholders
SpaceX is adopting a dual-class share structure for its upcoming IPO, a departure from Tesla’s single-share structure. The SpaceX offering will be split into Class A common stock for retail investors and Class B super-voting shares for insiders.
Musk is set to hold more voting power among Class B shareholders, which effectively links board control and executive authority directly to his stake. According to the SpaceX IPO filing, Musk “can only be removed from our board or these positions by the vote of Class B holders.”
Additionally, Musk could control the election and termination of most of SpaceX’s board members if he “retains a significant portion of his holdings of Class B common stock for an extended period”. This cements Elon Musk’s control over SpaceX by making his removal a self-vote.
The provision that only Elon Musk can fire himself is at the helm of SpaceX’s dual-class structure. The practice is common among public tech companies that are led by founders. It gives founders and early investors more control compared to public shareholders. But even in companies where this approach is applied, and founders have a chance to influence outcomes through voting power, boards still retain the authority to remove a CEO.
Musk’s Veto Power Goes Beyond the Norm
Experts say that Musk’s power to veto any attempts to remove him as CEO goes beyond the norm. SpaceX further noted that its governance structure would limit investors’ “ability to influence corporate matters” as well as the election of directors.
“This provision is not common. Usually, the removal of the CEO is a decision left to the board, and controllers rely on their power to replace the board,” Harvard Law School Professor, Lucian Bebchuk noted as cited by Reuters.
The impact of SpaceX’s governance structure would however depend on its founding legal documents. The Musk-led company is targeting to raise $75 billion in what analysts have said could be the largest public listing.
Dual-Class Share Structures are Not Unusual
But Musk’s plan to control SpaceX after the IPO is not unusual. Most founder-led tech companies that list publicly opt for the dual-class share structure. When Facebook went public in 2012, it granted super-voting shares to early investors, including its founder, Mark Zuckerberg. However, control was later concentrated as early investors sold their stakes. Recently, listings such as Figma, have consolidated super-voting power directly in founders after going public.
