NYC Pensions Boss Says SpaceX’s Disregard for Shareholders Has ‘No Precedent’

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The SpaceX IPO is already oversubscribed, with the offering expected to price on June 11 and begin trading the following day. The $75 billion being sold this week values the company at roughly $1.8 trillion.

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For some ESG-focused investors, governance concerns have proved a dealbreaker. AkademikerPension, a Danish pension fund with $25 billion in assets, said at the end of May it won’t be participating in the IPO. Not only is SpaceX “grossly overvalued” but it also has a “catastrophic governance structure,” AkademikerPension Chief Investment Officer Anders Schelde said on May 29. The fund will also exclude SpaceX via passive, index-tracking investments, he said.

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In the UK, EdenTree Investment Management told Bloomberg it’s expecting to stay away from the IPO. SpaceX’s intended governance structure would “reduce the protections available to minority investors,” said Hayley Grafton, senior sustainable investment analyst at EdenTree, which manages around $4.3 billion in assets. 

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“The main question for us is whether we are comfortable allocating clients’ assets to a structure where weak investor protections appear to be the price of admission,” Grafton said. “On the information available today, the answer is, ‘No’.”

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Bård Bringedal, CIO for equities at Norway-based Storebrand Asset Management, says the investor “notes that SpaceX’s governance structure raises a number of clear concerns.” 

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For that reason, the $145 billion asset manager has “no plans to invest in SpaceX in our actively managed strategies,” he said. However, the company “does not meet our exclusion criteria,” meaning Storebrand’s “index-tracking strategies may still gain exposure if the company is included in relevant benchmarks,” Bringedal said.

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SpaceX is set to be fast-tracked into the Nasdaq 100 Index, after Nasdaq Inc. changed its rules to accommodate the company. S&P Dow Jones Indices’ index committee, meanwhile, won’t drop its requirement that companies generate positive net income for at least a year before they can join the S&P 500 Index.

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Fast-tracking SpaceX into indexes is not “prudent,” Levine said. “The whole idea of having a waiting period is that stocks tend to be volatile in the early days because they’re unproven. I think it would be prudent to take a little bit of time and see where it stabilizes at.”

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Nell Minow, co-founder and chair of ValueEdge Advisors LLC, says she’s advising clients asking about this week’s SpaceX IPO “not to buy the stock or the indexes,” because, in her view, the company’s offering “extinguishes shareholder rights entirely.”

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Instead, Minnow says she’s “recommending that large institutional investors tell their financial institutions to create new indexes” that exclude SpaceX.

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For the most part, however, governance concerns aren’t preventing investors from lining up for a piece of SpaceX. And any ESG advisers telling CIOs to stay away from SpaceX might find they just sent a “career-ending memo,” according to one former UK-based sustainability manager who asked not to be identified by name discussing such a sensitive matter.

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The ESG considerations around SpaceX are “highly complex,” says Nick Gaskell, senior sustainability investment manager at Aberdeen Investments. “Taking a balanced view, there is clear value from SpaceX operations,” he said. 

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SpaceX announced in February that it had acquired Musk’s xAI, which includes the chatbot, Grok, and the social media platform, X. The deal gave SpaceX a valuation of $1 trillion at the time, and xAI a value of $250 billion, Bloomberg News reported at the time.