Exclusive: SpaceX IPO filing shows Elon Musk can retain board control

SAN FRANCISCO / BOSTON, April 23 (Reuters) - SpaceX is telling prospective investors its board will not need a majority of directors who are independent of the company, according to an excerpt of its IPO filing reviewed by Reuters, underscoring how founder Elon Musk is retaining control of the rocket and artificial intelligence maker.

In a departure from the vast majority of public companies, SpaceX said it would maintain "controlled company status" after its $1.75 trillion IPO, expected this summer. That means it will not need a majority of it board to be independent, nor need independent compensation and nominating committees, the filing excerpt showed. ⁠It only must have an audit committee composed entirely of independent directors, the document stated.

A 2024 study by the National Association of Corporate Directors found that just 3% to 4% of the Russell 3000 index was comprised of firms where insiders constituted a board majority.

SpaceX may still choose to add independent directors. One precedent is Meta Platforms (META.O), opens new tab , a peer technology company whose CEO's majority voting power gives it a "controlled company" status under Nasdaq rules. Meta has continued to have most of its directors be independent, nonetheless.

SpaceX did not immediately return a Reuters request for comment on the filing.

The news follows Reuters reporting that found Musk and a small group of insiders have super-voting shares that would outweigh other investors.

Having a like-minded board is not new for Musk. While his electric carmaker Tesla lists a ⁠majority of its nine directors as being independent under Nasdaq standards, many critics have raised concerns that the board - which includes Musk's brother Kimbal and former Tesla Chief Technology Officer JB Straubel - remains too close to the CEO.

Those concerns have contributed to a long cycle of complaints at Tesla such as a judge's 2024 ruling to rescind Musk's $56 billion pay package on the grounds the board lacked independence when it awarded the pay in ⁠2018. Musk won a ruling restoring the pay in December.

On the other hand, having controlled company status could give SpaceX more flexibility to strike pay arrangements, said David Larcker, a Stanford University professor who follows corporate governance.

The status "seems to alleviate some of the things that have been legally painful ⁠for Tesla," Larcker said.

SpaceX's board will oversee potentially huge amounts of compensation for Musk according to related parts of the document, which outline market capitalization milestones of as much as $7.5 trillion as goals for restricted stock payments to vest.

The document also states the board ⁠at different points established vesting goals such as "the Company's establishment of a permanent human colony on Mars with at least one million inhabitants," and the completion of "non-Earth-based data centers capable of delivering 100 terawatts of compute per year."

Reporting by Jeffrey Dastin in San Francisco, Ross Kerber in Boston and Echo Wang in New York; Editing by Kenneth Li and Kim Coghill

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Jeffrey Dastin

Thomson Reuters

Jeffrey Dastin is a correspondent for Reuters based in San Francisco, where he reports on the technology industry and artificial intelligence. He joined Reuters in 2014, originally writing about airlines and travel from the New York bureau. Dastin graduated from Yale University with a degree in history. He was part of a team that examined lobbying by Amazon.com around the world, for which he won a SOPA Award in 2022.

Ross Kerber

Thomson Reuters

Ross Kerber is U.S. Sustainable Business Correspondent for Reuters News, a beat he created to cover investors' growing concern for environmental, social and governance (ESG) issues, and the response from executives and policymakers. Ross joined Reuters in 2009 after a decade at The Boston Globe and has written on topics including proxy voting by the largest asset managers, the corporate response to social movements like Black Lives Matter, and the backlash to ESG efforts by conservatives. He writes the weekly Reuters Sustainable Finance Newsletter.

Echo Wang

Thomson Reuters

Echo Wang is a correspondent at Reuters covering U.S. equity capital markets, and the intersection of Chinese business in the U.S, breaking news from U.S. crackdown on TikTok and Grindr, to restrictions Chinese companies face in listing in New York. She was the Reuters' Reporter of the Year in 2020.