Like many startups of high value, SpaceX occasionally permits its employees to liquidate a portion of their stock through sales to authorized external investors.
TechCrunch has reviewed an internal document from SpaceX regarding a tender offer that took place in May 2022. Musk shared on X last month that these sales for employees occur roughly every six months.
In SpaceX’s most recent tender offer, held in December 2024, the company’s valuation soared to $350 billion, as reported by CNBC. In light of this, we are reissuing our analysis of the document that was first made public in June 2024.
These documents provide fascinating insights into the investors authorized to purchase these secondary shares and the advantageous terms they receive.
According to the documents, investors acquired shares at $70 each from employees. This price represents a significant discount compared to the primary round share prices where the company sells shares to raise capital directly.
During the primary round in 2022, shares were priced at $270. (The last time SpaceX offered shares at $70 in a primary sale was during its Series G in 2015, where shares were priced at $77.46 per share).
The primary reason for this substantial discount is that employees hold common stock while investors in primary rounds generally acquire preferred stock, which provides them with benefits such as dividends and priority during liquidation. They are the first to recoup their investment if the company is ever sold.
The document reveals that as of 2022, in the event of a sale, the initial $6.67 billion would be allocated to preferred shareholders. Since then, the company has raised another $750 million, suggesting that this amount owed to investors should be further increased. If SpaceX achieves its current astronomical valuation of $350 billion, these liquidation preferences should not adversely affect employees or common stockholders. However, if the company faces a sale for less than $7 billion, common stockholders could potentially receive nothing.
Regarding dividends, internal documents reviewed by TechCrunch indicated that SpaceX had not issued any as of 2019. However, if the board chose to declare dividends, they would be distributed in fixed amounts based on the investment timing. These amounts vary from a few cents per share for early investments to more than $10 for shares bought at later and higher valuations.
For employees, the news about their shares in 2022 was particularly favorable. In February 2022, SpaceX executed a 10-for-1 stock split of its Class A, B, and C common shares, although the preferred shares were unaffected. The documentation does not clarify the differences between the various classes of common shares. In publicly traded companies, different classes often come with distinct voting rights. For instance, one share class owned by the founder might have ten votes per share, enabling the founder to maintain control while liquidating shares and reaping profits.
It remains uncertain when, or if at all, SpaceX will go public. Secondary sales like this are among the few avenues available for employees wishing to sell their shares.
Further positive news for employees was that the $70 per share offered represented an improvement over a prior tender of $56 when adjusted for the stock split, as reported by Bloomberg. Additionally, Bloomberg reported earlier in 2024 that the next tender offer might reach between $108 and $110 per share. In December, Bloomberg noted that investors were prepared to pay up to $185 a share.
Which investors got to buy?
An intriguing aspect revealed in the 2022 documents is that only a select group of investors were identified as authorized buyers, most of whom have ties to SpaceX, either as vocal supporters of Musk or through historical connections.
The authorized investors included:
Andreessen Horowitz (a16z) was sanctioned to purchase nearly 4.3 million shares for around $300 million. Notably, a16z is not a long-standing major investor in SpaceX but gained a significant position in the company during its $250 million raise in August 2022, according to PitchBook. The firm also took the lead in SpaceX’s $750 million round at a $137 billion valuation in 2023, as reported by CNBC.
Co-founder Marc Andreessen has been acquainted with Musk for years, as they have traversed similar circles in Silicon Valley’s tech elite. In recent years, he has emerged as a strong supporter of Musk, often praising the ventures of the SpaceX, Tesla, and X CEO. His admiration is evident through various expressions of support, from highlighting Musk’s investments in startups to expressing admiration for Musk’s resilience. Andreessen even engaged in a public debate with billionaire and fellow VC Vinod Khosla (an advocate for OpenAI) on X, after Khosla praised OpenAI shortly after Musk’s legal actions against it, which garnered Musk’s attention.
Aliya Capital Partners is linked with Aliya Growth Fund, which was allowed to buy just over 1.4 million shares for nearly $100 million. Aliya operates as a family office for affluent individuals in Miami and claims that SpaceX is one of its premier holdings. Notably, Aliya previously invested $360 million when Musk acquired Twitter for $44 billion in 2022, as Reuters noted. Despite Musk’s immediate layoffs and management changes at Twitter, Aliya has remained publicly optimistic about the platform’s potential returns. “We project Twitter could yield a return of 4-5x in a few years with comparably limited risk,” stated Aliya’s CEO Ross Kestin in December 2022.
Aliya has also been supportive of SpaceX’s initiatives. In April, around the time Bloomberg reported that Starlink is still operating at a loss, Aliya promoted Musk’s vision on LinkedIn, celebrating the achievement of 500,000 new Starlink subscribers in four months as evidence of exceptional vision and execution.
Gigafund, co-founded by a SpaceX board member, was allotted over 1.4 million shares costing nearly $100 million. Gigafund was established by Luke Nosek, another member of the PayPal mafia, who partnered with Peter Thiel at Founders Fund, which played a key role in financing SpaceX. Nosek led the initial VC investment into SpaceX and has served on its board ever since. He established Gigafund in 2017. Fellow co-founder Stephen Oskoui, also a former Founders Fund investor, has pursued investments in Musk’s companies, such as Neuralink and the Boring Company.
137 Ventures, linked to 137 Holdings, had permission to acquire just under 1.1 million shares for nearly $75 million. This VC fund is noteworthy for specializing in secondary market acquisitions. Founders Justin Fishner-Wolfson and Alex Jacobson originally met while working on the SpaceX investment at Founders Fund. Musk’s initial pitch for SpaceX was for a $5 million investment, which Fishner-Wolfson argued should be significantly higher. Ultimately, Founders Fund invested a substantial amount, estimated at around 20% of their total fund. Fishner-Wolfson established 137 Ventures in 2011.
Point 2 Prove Investment was allowed to acquire 1 million shares at a cost of $70 million. This entity appears to be a special purpose vehicle led by the enigmatic global investment firm Vy Capital, as detailed in SEC Form D from July 2022. Vy Capital was founded by Alexander Tamas, who spent his early career at Yuri Milner’s DST. Though Tamas remains relatively silent in public and is not an outspoken supporter of Musk, his firm committed $700 million to Musk’s Twitter acquisition, as reported at the time. Vy has invested in several Musk-related ventures, including Boring and Neuralink.
Atreides Management is connected to Atreides Special Circumstances Fund, which acquired nearly 429,000 shares for around $30 million. Gavin Baker, Atreides’ founder, has longstanding ties with SpaceX. Prior to founding Atreides in January 2019, he spent 18 years at Fidelity, ultimately managing the $17 billion Fidelity OTC Fund. He made his first investment in SpaceX during his tenure at Fidelity, and by 2022, SpaceX comprised the largest proportion of Atreides’ VC portfolio. Although Atreides managed approximately $3 billion in assets that year, it currently boasts about $4 billion, as indicated by a recent SEC filing. Baker is a visible supporter of Musk, advocating for the reinstatement of Musk’s $56 billion Tesla compensation package and endorsing the company’s shift to Texas.
TCP Exploration Fund 2022 was provided with over 357,000 shares for nearly $25 million. This fund is associated with LA’s Troy Capital Partners, founded by Myspace founder Josh Berman, as indicated in SEC Form D. Reports indicate that Troy’s managing partner, Anthony Tucker, has been pivotal in Troy’s investments in SpaceX since its Series J round in 2019, which valued the company at around $28 billion post-money, according to PitchBook. Troy has also supported the now-defunct Hyperloop One project, which sought to create a rapid underground transport system inspired by Musk’s ideas.
Additionally, this SpaceX sale also granted permission for two more investors to acquire about $50 million worth of shares combined, although the connections of these investors to Musk remain uncertain.
SpaceX and the funds approached did not respond to multiple requests for commentary, except for Atreides, which declined to comment.
This article was initially published on June 19, 2024, and has been updated on January 1, 2025, to reflect SpaceX’s latest valuation.
Compiled by Techarena.au.
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