SpaceX Gives Musk Incentive to Hit $6.6 Trillion in Market Cap
The Takeaway
- Elon Musk acquired $1.4 billion in SpaceX shares from employees.
- SpaceX IPO prospectus reveals new stock award plan for Musk.
- Musk gets pay increases if market cap climbs toward $6.6 trillion.
Elon Musk increased his stake in SpaceX last year by purchasing $1.4 billion of stock from current and former employees, part of a series of moves leading up to the company’s initial public offering that increased his sway over the company.
The large secondary stock purchase was made through the mega-billonaire’s trust. It was disclosed in a draft of SpaceX’s confidential IPO prospectus reviewed by The Information. The document also revealed a new plan to award Musk with tens of millions of shares if SpaceX’s market cap increases to as high as $6.6 trillion.
It was unclear at what valuation Musk bought the stock last year. His company has seen a sharp increase in valuation over the past year, through secondary share sales and an acquisition of his artificial intelligence company, xAI. SpaceX doubled its valuation to $800 billion in an employee share sale last December and was valued at $1.25 trillion after it merged with xAI this February.
In another move that increases his influence, the prospectus indicates that SpaceX will adopt a dual-class share structure that would give Elon Musk super-voting Class B shares, in which each share is worth 10 votes, according to a person familiar with the matter.
Musk’s total ownership stake and voting control wasn’t immediately clear. The document says that the dual-class structure “concentrates voting control with Mr. Musk and other shareholders of our Class B common stock.”
A spokesperson for SpaceX didn’t immediately respond to a request for comment.
Data Center Incentive
SpaceX also gave Musk a similar type of ambitious stock award that made him one of the world’s richest people from his leadership of Tesla.
The company approved a plan last month that would award CEO Elon Musk 60 million additional shares if the company’s market capitalization climbs from $1.1 trillion to as high as $6.6 trillion, and completes an ambitious plan of building data centers in space to supply compute for AI developers. The stock vests as SpaceX increases its market cap in $500 billion increments.
The document says that the shares vest if the company’s space data centers can deliver “100 terawatts of compute per year,” which is orders of magnitude more than peak power consumption in the U.S.
The document’s risk factors acknowledge the longshot nature of the orbital data center goal. It calls its efforts to develop data centers in space “in early stages,” with “significant technical complexity and unproven technologies.” The company’s satellites and rockets also operate “in the harsh and unpredictable environment of space,” it notes.
The award was on top of an earlier goal SpaceX’s board of directors set for Musk in January. He would get up to 200 million additional shares if the company hits stock-price targets and establishes a Mars colony with at least 1 million inhabitants.
SpaceX has been briefing potential investors ahead of its planned public offering, slated for mid-June. The company is expected to raise $75 billion at a valuation of up to $1.5 trillion. To prepare the colossal offering—the largest ever by a wide margin—SpaceX has engaged a troop of banks to line up retail and institutional investors around the world. SpaceX executives are hosting potential investors and research analysts this week at its facilities in Tennessee and Texas, according to three people familiar with the matter.
The document also indicates that Musk is looking to avoid the kind of shareholder lawsuits he has faced previously over his pay package and other corporate matters. One risk factor the company notes in the SpaceX prospectus is that shareholders may not be able to pursue certain legal claims because of a “requirement for mandatory arbitration.”
The move comes after the Securities and Exchange Regulation last year said it wouldn’t delay companies’ IPO registration documents if they included arbitration clauses that cover shareholder claims, removing one impediment to companies’ adopting such clauses.