Company’s policy links employee behavior to stock sale rights, raising concerns about control and equity liquidity

SpaceX, the aerospace manufacturer founded by Elon Musk, has instituted uncommon stipulations regarding its employees’ stock awards, according to internal documents and sources reported by TechCrunch. These provisions include the ability for SpaceX to buy back vested shares from employees within six months of their departure from the company, under any circumstances. Furthermore, SpaceX reserves the right to exclude current and former employees from participating in tender offers if they are found to have engaged in “an act of dishonesty against the company” or violated company policies.

These conditions have reportedly caused unease among SpaceX staff, particularly since the clause regarding “dishonesty” often comes as a surprise to many. The implications of being barred from selling stock in tender offers are significant, as employees would then have to wait for an indefinite public offering to cash in on their shares, the timing of which remains uncertain.

SpaceX’s compensation packages, like those of many tech companies, include stock options and restricted stock units (RSUs) as a means to attract and retain talent. However, the private status of the company’s stock means employees cannot freely sell their shares without company approval. Although SpaceX typically hosts biannual buyback events allowing employees to liquidate their assets, the introduction of behavioral conditions adds a layer of uncertainty to this process.

Notably, if an employee is terminated “for cause,” SpaceX claims the right to repurchase their stock at $0 per share, a policy deemed unusual by stock options expert Mary Russell. These terms are said to exert significant control over employees, even after they leave the company, due to fears of losing stock value without compensation. Additionally, departing employees are reportedly pressured into non-disparagement agreements, further emphasizing the company’s control.

SpaceX’s disclosure documents, akin to those required for public companies, highlight the inherent risks of investing in the firm’s securities, including those associated with Musk’s public actions and statements. The documents caution about the potential impacts on SpaceX’s market capitalization and raise concerns about the future availability of Regulation D, crucial for private financing transactions, due to Musk’s past SEC settlement.

With a valuation exceeding $180 billion, SpaceX stands as one of the world’s most valuable private entities. Its stock structure divides into preferred and common stock, with employees typically receiving non-voting Class C common stock. This policy underscores the complex dynamics at play between employee compensation, company control, and the implications of Musk’s public profile on SpaceX’s operations and financial health.