New York, California pension leaders oppose 'extreme' SpaceX control structure

AdrianB1

This is subjective, there are companies that are mostly an investment vehicle and companies that have a strong motivation to make changes in the world. Investors, especially passive investors like pension funds that are only interested in returns, should know in advance what they are getting into and decide if they want to buy shares or not; it should not be "I will buy shares and try to change the company". I worked for a company where activist investors bought enough shares to have influence, then practically messed up with the company in a way that today, 10-15 years later, the company is a shadow of what it used to be - fell from top positions in Fortune 500, share price is lower in inflation-adjusted money, management is extremely politized and unprofessional, most professionals left or retired. I don't think this is what we want from SpaceX, in the end this is the company that moved the needle in space launches and cost per launch/kg, it's not a ketchup company that not too many people will cry about.

jt2190

Same article syndicated on msn.com, without paywall: https://www.msn.com/en-us/money/companies/new-york-californi... The issues: > The New York and California pension systems would become holders of SpaceX shares through their passive allocations if the company is admitted to major U.S. stock indexes. > The officials… objected to the amount of power the board has given Musk over the company, including: - voting control over the stock, - veto power over his own removal as CEO, and - protections from litigation, including mandatory arbitration for SpaceX shareholder claims. > … > In their letter, the pension leaders urged SpaceX to: - adopt one-share, one-vote or sunset super-voting shares within seven years; - install a majority-independent board and separate the CEO and chair roles; - eliminate provisions protecting Musk from termination without his approval; - scrap mandatory arbitration; and require independent approval of related-party transactions with Musk's other companies. (Formatting mine; moved paragraph about becoming holders above the lists of concerns and recommendations.)

mittensc

good, pensions should not go into companies where you have no control. That's not an investment, it's a wealth transfer to original investors at a price they dictate. without control you can get original founder deciding to build cybertrucks and associating your brand with nazis. These should not be included in indexes either.

jbecke

Option 1: Elon has control and optimizes for cool shit and going to Mars, and maybe abuses the corporate entity a bit, as a piggy bank, or whatever. Option 2: the market has control, and optimizes for short term starlink revenue and the launch business. I prefer Option 1.

jmuguy

I'm more worried about the early inclusion into the Nasdaq 100 index and if other indexes will follow. I don't want my retirement to be passively buying Elon's latest shell game.

khriss

> Elon has control and optimizes for cool shit and going to Mars This trope needs to die. SpaceX has no plans to go to Mars. Elon meanwhile regularly says forward looking stuff to attempt to justify the lofty valuations of his companies. Let's just say there is a ... mixed track record on these proclamations (Full self driving, Hyperloop anyone?)

RhysU

> The New York and California pension systems would become holders of SpaceX shares through their passive allocations if the company is admitted to major U.S. stock indexes. If they have discretion, these pensions can replicate the S&P500 minus SpaceX if they don't like SpaceX's governance. If they're forced to passively hold precisely the S&P500 then shaddup and stop active managing. Next.

trunkiedozer

Then don’t buy the stock

randallsquared

> would constitute the most management-favorable governance structure ever brought to the U.S. public markets at this scale The "at this scale" is doing a lot of work here. The SpaceX IPO will be $1.5T to $2T, and the next highest IPO ever on the US public markets was Alibaba at $231B. This is so far outside the previous scale that their statement would be true even if EVERY other public company was structured in the same way. Worldwide, the five highest have been Saudi Aramco, NTT, Alibaba, Facebook, and Uber, at 1.7T, 300B, 231B, 104B, and 75B. Note the outlier, here, which was not on the US public market, AND has a very similar tiny float. If you go by capital raised, it's not quite as stark, but it's still quite different in the US market: 25B raised by Alibaba, the previous high, compared to 75B expected for SpaceX according to the article. The point that SpaceX isn't at the same scale regardless of governance is still pretty good, I think.

jmyeet

The SpaceX IPO may go down as one of the most manipulated in US history. I'd actually like to see the likes of Vanguard and Blackrock do is ignore the rules that will force passive funds to invest in SpaceX on a small float, creating passive funds with their own rules that won't invest in small floats. I know I'd move my money to more "total market" type funds that required their investments to be sufficiently liquid. It may not even come to that. I think if large pension funds and the large mutual fund managers coming out and saying "we don't trust this process" will probably be sufficient pressure to change it. There are two other issues with SpaceX in particular that kind of show just what a house of cards the Elon Empire is: 1. The whole xAI bailout. This isn't a new tactic. Elon did it with SolarCity where one of his companies bought another of his companies who owed a lot of money to yet another of his companies. Elon way overpaid for Twitter. Fidelity had slashed the valuation by as much as 80%. Elon rescued himself from a margin call on his Tesla shares by raising money for xAI and using that to buy Twitter. But now the xAI investors who (IMHO) felt fleeced had to be rescued and so SpaceX "bought" xAI. So the problem is that I've seen reports that xAI is losing >$1B/month. That's a huge drain on SpaceX's estimated ~$15B of annual revenue where it's already losing money due to the Starship program cost and delays; 2. Allegedly, one of the biggest buyers of Cybertrucks is (drum roll please) SpaceX. So, again, one Elon company is rescuing another. I have huge respect for what SpaceX achieved with Falcon 9 but honestly, I wouldn't touch any of this, as an investor, wtih a 10 foot barge pole. At least, not until the SpaceX float gets sufficiently large and the lock ups on selling expire so you get a true market picture of its value. And I think passive investors need to rewrite their rules to do this too.

irthomasthomas

It's interesting how Musk has engaged in such a distracting lawsuit against openai while he also prepares for the largest deal of his life, and the largest IPO in history. Exceedingly generous of him.

outside1234

They, and the S&P 500, need to declare that they will refuse to invest in it with this structure. Honestly, I'd like to see the S&P 500 also require two years of profit as a public company before investing as well.

rjmunro

According to Gemini, index funds in total own about 20% of the value on the Nasdaq 100 index. So if you list a new company in Nasdaq, typically they have to buy 20% of it. But only about 5% of SpaceX will floated, which means there won't be enough shares to go round. They are doing a bunch of changes to rules to try and make this not completely break, but even if it doesn't, it feels like index funds are going to have to buy a lot of the SpaceX float, which is going to make it look like a successful IPO even if hardly any real investors buy it.

trunkiedozer

I know few here will understand this, but trust me, from an older wiser very successful investor, do yourself a favor, get into the stock market early, no excuses. Pick companies you know will do well. You’ll be able to control your future. Spacex will create more millionaires than Tesla + Apple + Microsoft combined.