Similar to other prominent startups, SpaceX periodically offers its employees the opportunity to liquidate a portion of their stock via sales to approved external investors.
An examination of a SpaceX internal memo regarding a stock sale in May 2022, which TechCrunch had access to, revealed that Elon Musk indicated on X last month these employee stock sale events occur semi-annually.
The memo sheds light on the identity of the investors sanctioned to acquire these secondary shares, highlighting the advantageous terms they receive.
According to the document, employees sold their shares at $70 each to investors during this particular tender offer. This price is significantly lower than what investors usually pay in primary investment rounds, where shares are purchased directly from SpaceX to gather funds.
For context, during a 2022 capital raise, shares were priced at $270 each. The document indicates that the last time shares were sold at a comparable low price was during the Series G round at $77.46 per share in 2015, as reported by PitchBook.
A major reason for the substantial discount is that employees are given common stock, whereas primary round investors typically receive preferred stock, which grants them dividend rights and priority in asset distribution should the company be sold. According to the document, preferred shareholders would be the first to recoup their investments, approximately $6.67 billion, before any other payments are made, a figure likely increased by at least $750 million following additional fundraising efforts reported in January 2023.
Whilst SpaceX has not historically distributed dividends as per a 2019 internal document, it does outline a potential fixed dividend payment system based on the investment round, with dividends ranging from a few cents to over $10 per share.
A bright spot for employees came in February 2022 when SpaceX enacted a 10-for-1 stock split for its Class A, B, and C common shares, though preferred shares were not split. This move made no distinctions between the different common share classes, a common practice among public entities to manage voting rights.
Without any clear plans for a public offering, these secondary sales serve as one of the few avenues for SpaceX employees to monetize their stock. Another encouraging development was that shares in this sale were priced at $70, compared to $56 in the prior offer, adjusted for the stock split, as reported by Bloomberg, with anticipations of future offers rising to between $108 to $110 per share.
Authorized Investors
The memo intriguingly noted that just a small group of investors received approval to purchase shares, many of whom have been vocal in their support for SpaceX’s founder Elon Musk or have had longstanding relationships with the company.
Among the approved investors:
Andreessen Horowitz (a16z), secured rights to acquire nearly 4.3 million shares worth almost $300 million. Despite not being a historical investor in SpaceX, a16z made significant headway into the company’s capital in a recent $250 million round in August 2022, as per PitchBook data, and led the charge in a $750 million round valuing SpaceX at $137 billion in 2023, according to CNBC.
Aliya Capital Partners, linked with the Aliya Growth Fund, was permitted to purchase over 1.4 million shares for close to $100 million. Aliya, a family wealth office based in Miami, counts SpaceX among its largest investments and demonstrated unwavering support even during Musk’s acquisition of Twitter in 2022 for $44 billion, as reported by Reuters.
Gigafund, co-founded by a SpaceX board member, was allotted over 1.4 million shares, amounting to nearly $100 million. Its co-founder, a member of the PayPal mafia alongside Musk, has been an ardent supporter through significant investments in SpaceX and other Musk ventures like Neuralink and the Boring Company.
137 Ventures, known for its secondary market investments, received authorization for nearly 1.1 million shares at approximately $75 million. This firm has a history of robust support for SpaceX, stemming from its founders’ time at Founders Fund where they were instrumental in backing Musk’s space endeavors.
Point 2 Prove Investment was allocated 1 million shares at a $70 million value. It appears as a vehicle led by Vy Capital, a discreet global investment entity known for its substantial commitment to Musk’s business undertakings, including his acquisition of Twitter and investments in other Musk-led companies.
Atreides Management, through its Atreides Special Circumstances Fund, was given nearly 429,000 shares valued at almost $30 million. The fund’s founder, with a deep connection to SpaceX from his tenure at Fidelity, has since made SpaceX a significant holding in Atreides’ venture portfolio.
Additionally, TCP Exploration Fund 2022, associated with Troy Capital Partners, was awarded over 357,000 shares for nearly $25 million, highlighting its founder’s long-standing support for SpaceX and Musk’s ambitious projects.
Moreover, two additional investors were given the nod to collectively purchase shares worth about $50 million, despite a lack of detailed background linking them to Musk.
SpaceX, as well as all the aforementioned funds, except for Atreides which opted not to comment, have not responded to inquiries for remarks.
Compiled by Techarena.au.
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