SpaceX's IPO Will Help Elon Musk Consolidate Power. Investors Welcome It.

Musk is poised to have even more sway at his rocket-maker, SpaceX, which is aiming to go public in June. Ethan Swope/Bloomberg News

Tesla's TSLA -1.95%decrease; red down pointing triangle shareholders already give Elon Musk leeway, entertaining the billionaire's whims as he plows money into robots and blessing a $1 trillion pay package that will pay out if he hits long shot targets.

He is poised to have even more sway at his rocket-maker, SpaceX, which is aiming to go public in June.

SpaceX's board has already granted him its own "moonshot" pay package, people familiar with the matter say. And, unlike at Tesla, the billionaire is expected to control SpaceX through the use of so-called supervoting shares, the people said.

While such moves raise the eyebrows of many corporate-governance experts -- until as recently as 2023, the S&P 500 banned companies with dual-class shares from entering its index -- investors large and small seem so eager for a piece of Musk that they are willing to overlook and even welcome such founder-friendly terms.

Musk and his associates are pitching existing and prospective investors on SpaceX's IPO this week in Starbase, the company town outside of Brownsville, Texas, where SpaceX builds and launches its Starship rockets.

Several existing SpaceX investors say they welcome the moves to keep Musk's interests aligned with their own.

SpaceX representatives have been telling investors they already have enough interest in the IPO from a mix of institutional investors and sovereign-wealth funds to raise the $40 billion to $80 billion they envision. And that is before factoring in the individual investors, who SpaceX hopes will buy one-third or more of the offering's shares, well above the typical portion.

While most SpaceX shareholders will hold Class A shares with one vote each on company matters, Musk and other key executives are expected to hold Class B shares that get 10 votes each, the people familiar with the matter said.

Part of the motivation for giving himself and other key executives supervoting shares at SpaceX is to consolidate power from the beginning, which Musk didn't do ahead of Tesla's 2010 IPO, other people familiar with the matter say. He has publicly expressed frustration that he could be voted out of the electric-vehicle maker, where he holds roughly 18% of the company's single share class, including options he could exercise any time, according to Verity Platform, which tracks insider share ownership.

Musk owned around 40% of SpaceX at the end of last year, according to public filings. That stake has likely grown since he merged SpaceX with his artificial-intelligence company xAI in February.

Supervoting shares at SpaceX could also make it easier for Musk to one day merge Tesla and SpaceX, which many investors believe is his ultimate goal.

SpaceX was valued at around $1.25 billion following the xAI deal. If it debuts at the even higher valuation envisioned, Musk would lead two of the roughly 10 or so public U.S. companies with valuations above $1 trillion. He would also hold two moonshot pay packages, which corporate-governance experts warn could motivate him to devote most of his time and energy to whichever seems most likely to pay off.

"He's obviously a high-powered person, and people can multitask, but there is at least the potential for some divided loyalties," said Margaret Engel, founding partner at pay-consultancy Compensation Advisory Partners.

The Information reported earlier this week that SpaceX plans to award Musk tens of millions of shares if the company's market value reaches as high as $6.6 trillion, among other things.

The pay package that Tesla shareholders approved for Musk in November could pay out $1 trillion in stock if he hits such goals as delivering millions of cars and a million robots, increasing the company's market value to $8.5 trillion from its $1.5 trillion high last year and pushing profitability dramatically. The company's board called the arrangement key to keeping Musk engaged with the company, given his many other projects.

On Wednesday, Tesla surprised Wall Street with better-than-expected profits and free cash flow, while also forecasting $25 billion in capital expenditures this year as it spends on AI compute and new factories.