Elon Musk borrowed $500 million from SpaceX at interest rates as low as 1%, used the rocket company to bail out a struggling solar venture, and most recently had SpaceX acquire his cash-burning AI lab.
Background
The report comes six weeks before SpaceX is expected to go public with the largest IPO in history.
What the Investigation Found
Musk pulled three loans totaling $500 million from SpaceX between 2018 and 2020, at rates that ranged from under 1% to nearly 3%. For comparison, the prime rate sat closer to 5% for most of that period. As a private company, SpaceX is not subject to the same lending restrictions as public companies under the 2002 Sarbanes-Oxley Act.
SpaceX also lent Tesla Inc. $20 million during the 2008 crisis. Additionally, SpaceX injected $255 million into SolarCity in 2015 when the debt carried a high default risk. This year, SpaceX acquired xAI after Musk stated that the AI venture was “not built right.” At least seven xAI co-founders have since quit, and Musk has announced plans to rebuild the venture “from the foundations up.”
Law professor Ann Lipton has described these arrangements as “conflicted transactions” and a “hazard” of investing with Musk.
Market Predictions
Despite the recent revelations, traders still give SpaceX a 72% chance of going public by June 30, with the December 31 contract at 94%. The closing market cap contract is split between $1.5-$2 trillion at 36% and $2-$2.5 trillion at 28%. The timing contracts have not moved significantly in response to the news, suggesting that traders view the disclosures as already priced in.
Implications for Shareholders
Peter Thiel’s Founders Fund, one of SpaceX’s largest outside backers, has expressed concerns that Musk is prioritizing his own interests over those of other shareholders. The xAI deal has diluted their stake in SpaceX.
Tesla has been the most liquid Musk trade for years, and a 2024 Cleveland pension fund lawsuit accused Musk of diverting Nvidia chips from Tesla to xAI. Tesla also overrode a shareholder vote in January to invest $2 billion in xAI.
NYU’s Aswath Damodaran, who believes SpaceX is roughly 30% overvalued, notes that investors must accept the “Musk package” - both the good and the bad. The upcoming S-1 filing, expected in May, will force all related-party transactions into the public eye for the first time.