SpaceX is warning investors that it may dish out “significant capital” in “future transactions” after its upcoming IPO, language that was added amid continued industry rumors that CEO Elon Musk eventually plans to merge his space and artificial intelligence company with Tesla.
The new language was hidden deep in the risk factors section of SpaceX’s first report. official amendment to its IPO filing, which was made public last month. The company added this sentence to the end of the first paragraph of a risk about how mergers and acquisitions can go wrong:
We may issue a significant amount of equity in connection with future transactions.
SpaceX has been busy with mergers and acquisitions, acquiring Musk’s artificial intelligence company xAI last year and recently entering into a deal with cursor that includes an option to buy the startup for $60 billion in stock after the IPO. It’s certainly possible that SpaceX has other goals in mind after it raises $75 billion when it lists on the Nasdaq market (minus $20 billion committed to repay xAI and X’s previous debt). But this warning appears designed to prepare investors for the possibility of a major dilution event, such as a future combination with Tesla.
Musk has mulled the possibility of combining his companies for many years, and SpaceX’s IPO is only fueling rumors that he will finally unite his two largest entities. A merger of this size would face a number of potential legal and regulatory challenges, and would likely have to be approved by a vote of Tesla shareholders. But, as the IPO filing demonstrated, Musk has supreme voting power at SpaceX; the only person who could reject a merger on that side of the term sheet would be Musk.
Musk’s voting power at SpaceX would not be at risk during a major dilution event. SpaceX has three main classes of shares heading into this IPO. Everyone has the same basic economic rights, but different voting rights.
Class A shares are those that will be sold to the public and have one vote per share. Class B shares are wholly owned by Musk and have 10 votes per share. SpaceX also has Class C common stock, which does not have any voting rights. While those Class C shares are currently used to compensate executives, Musk could use them to buy other companies without diluting his power. (SpaceX also has reserved Class D shares, which have reduced economic rights; the company has not yet decided whether those shares will have voting power.)
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