US's Three Largest Public Pension Funds Oppose SpaceX's 'Excessive' Control Structure

According to an exclusive Reuters report, the leaders of three major U.S. public pension funds have jointly written a letter to Musk, expressing serious concerns about the "extreme" ownership and control structure adopted by SpaceX for its upcoming public listing, urging him to remove provisions that will harm shareholder protection rights.

"Our letter aims to express serious concerns about the new extreme governance structure and related provisions that Space X intends to disclose in its registration statement," wrote New York State Comptroller Thomas DiNapoli, New York City Comptroller Mark Levine, and California Public Employees' Retirement System (CalPERS) CEO Marcie Frost in this joint letter reviewed by Reuters. The letter was sent to Musk personally on Wednesday.

The three officials, on behalf of the pension systems that manage a combined total of over $1 trillion in retirement assets, all rank among the four largest public pension plans in the United States.

"The most management-friendly public listing structure in history"

The three parties wrote in the letter that Space X's IPO "will constitute the most management-friendly governance structure ever in the U.S. public markets at this scale." They cited reports in the media, including Reuters, on the confidential registration submission documents that Space X secretly submitted to regulatory authorities and specifically listed the following main issues:

• Super voting rights: Musk controls the voting rights of the company's stock through Class B shares, and the board of directors can only remove him as CEO by voting by Class B shareholders, with the actual voting rights being controlled by Musk himself.

• Controlled company exemption: Space X plans to adopt the identity of a "controlled company," thereby bypassing regulatory requirements for the majority of independent directors, independent compensation committees, and nominating committees.

• Mandatory arbitration clause: Space X plans to include a mandatory requirement for shareholders in the company's bylaws to submit federal securities law claims to arbitration, becoming the first large U.S. public company to adopt this arrangement, effectively depriving investors of the right to bring class action lawsuits.

• Extremely high litigation threshold: Space X has relocated to Texas, where new local laws allow companies to require shareholders to hold up to 3% of the circulating shares to bring derivative lawsuits. Based on Space X's current valuation, this threshold would require holdings of tens of billions of dollars—pension officials point out that, in reality, only Musk himself can meet this standard.

Space X is seeking to be included in the Nasdaq 100 Index (NDX) in advance; if successful, New York and California pension systems will passively hold Space X shares through passive index allocation, regardless of their governance stance.

The letter states: "Because Space X is about to occupy a systematically important position in the public market and become an inescapable position in our investment portfolio through index inclusion, its governance structure should at least adhere to the basic protection standards relied upon by long-term institutional capital, rather than attempting to weaken these standards."

Related transactions and Musk's personal risks are highlighted

The letter also highlights Musk's leadership of Tesla, X, xAI, Boring Company, and Neuralink, coupled with his excessive multi-year compensation packages at Space X and Tesla, putting the two companies "in effect in competition for his time and energy.".

Regarding related transactions, the letter lists Space X's acquisition of xAI in full stock in February of this year, and Tesla's $2 billion investment in Space X in the first quarter of this year—both transactions were completed before Space X introduced public shareholders or established an independent committee.

Furthermore, the three parties cited Musk's regulatory history as a basis for risk assessment, including the settlement reached with the SEC in 2018 over the "funding secured" tweet, the proposed settlement in May 2025 over the failure to disclose Twitter holdings in a timely manner for $1.5 million, and the jury's verdict in March of this year finding him guilty of defrauding shareholders in the Twitter acquisition process (Musk is appealing this decision).

Space X's IPO is expected to raise $75 billion, with the company valued at $1.75 trillion, potentially becoming the largest initial public offering in U.S. history.

The three parties urged Space X in the letter to take the following measures: implement "one share, one vote" or set a sunset clause for super voting shares within seven years; establish a majority independent board and separate the roles of CEO and chairman; remove protection provisions that prevent his dismissal without Musk's consent; abolish mandatory arbitration arrangements