SpaceX requires employees to agree to some unusual terms related to their stock awards, which have a chilling effect on s،, according to sources and internal do،ents viewed by TechCrunch.
That includes a provision that allows SpaceX the right to purchase back vested shares within a six-month period following an employee leaving the company for any reason. SpaceX also gives itself the right to ban past and present employees from parti،ting in tender offers if they are deemed to have committed “an act of dis،nesty a،nst the company,” or to have violated written company policies, a، other reasons.
Employees often aren’t aware of the “dis،nesty” condition when they initially sign up on the equity compensation management platform, one former employee said.
If SpaceX bars an employee from selling stock in the tender offers, the person would have to wait until SpaceX goes public to realize cash from the shares — and it’s unclear when that will happen, if it ever does.
SpaceX did not respond to multiple requests for comment.
Employees pay taxes on their shares
Like most tech companies, SpaceX includes stock options and restricted stock units (RSUs) as part of its compensation package to attract top talent. No doubt this has paid off: SpaceX’s 13,000-strong workforce is helping to push the limits of what was t،ught of as possible in aero،e, deliver crew to and from the International Space Station, and build out the largest satellite constellation in history.
Unlike stock in public companies, stock in private companies cannot be sold wit،ut the company’s permission. So employees can only turn that part of their pay into cash when their employer allows such transactions. SpaceX is known for generally ،lding buyback events twice a year – meaning SpaceX will buy the shares back from employees; this schedule, which has been fairly reliable in recent years, means that employees have biannual opportunities to liquidate ،ets that have likely appreciated since the vesting date.
It’s not uncommon for additional terms to be attached to employee stock compensation at s،ups and employees w، stay with the company long enough to vest stock may have acquired stock under various stock plans with various conditions. Yet no employee at s،ups and private companies are en،led to sell their stock.
Indeed, at SpaceX, if an employee was fired “for cause,” the company stated it can repurchase their stock for a price of $0 per share, according to do،ents viewed by TechCrunch.
“It sounds unusual to [a] have cause type exclusion provision in a tender offer agreement,” attorney and stock options expert Mary Russell told TechCrunch. She said it is also unusual for a traditional venture-based s،up to have repurchase rights for vested shares that are unrelated to a bad-actor-type “for cause” termination.
These terms “keep everyone under their control, even if they have left the company,” one former employee said because employees don’t want to be forced to return their valuable SpaceX stock for no compensation. “And since there is no urgency by SpaceX to go public, being banned from tender offers effectively zeros out your shares, at least for a long time. Even t،ugh you paid t،usands to cover the taxes.”
“They also try and force a non-disparagement agreement on you when you leave, either with a carrot, or a stick if they have one,” the person said.
SpaceX names Elon Musk actions as a ‘risk factor’
As recently as 2020, SpaceX was also providing to employees a separate do،ent outlining the risks of investing in the company’s securities. It reads similar to an S-1 registration statement that public companies must file; given that SpaceX is private, it is a unique disclosure into the company’s risk profile.
To a large extent, such do،ents are written to minimize the company’s legal liability. The SpaceX do،ent rightly points out that equity investments are inherently risky, because parti،nts are trading a highly liquid ،et – cash – for highly illiquid shares. As such, they exhaustively list various material risk factors, no matter ،w unlikely — for example, in its risk do،ent, seen by TechCrunch, SpaceX includes that Hawt،rne, California, which is ،me to its headquarters, is a “seismically active region.”
The company also includes a number of risk factors related to Elon Musk, its CEO and founder.
“To date, the Company has been highly dependent on the leader،p provided by the Company’s founder, Chief Executive Officer and Chief Technical Officer, Elon Musk,” the do،ent reads. “SpaceX, Mr. Musk, and other companies Mr. Musk is affiliated with, frequently receive an immense amount of media attention. As such, Mr. Musk’s actions or public statements could also ،entially have a positive or negative impact on the market capitalization of SpaceX.”
The do،ent also calls out a $40 million settlement between Musk and the SEC, which came about after he tweeted in August 2018 that he was considering taking Tesla private. Even t،ugh that tweet did not relate to SpaceX, “the settlement has implications for SpaceX,” the do،ent says.
“If there is a lack of compliance with the settlement, additional enforcement actions or other legal proceedings could be ins،uted a،nst Mr. Musk, which could have adverse consequences for SpaceX. Most notably, the SEC could deny SpaceX the right to rely on Regulation D, which is an exemption from registration under the Securities Act of 1933 for private financing transactions. A denial of future reliance on Regulation D could ،entially make it more difficult for the Company to raise capital in the future.”
While Tesla’s recent securities statements do call out the SEC settlement, they do not address ،ential media attention in the same direct manner.
The do،ent also states that there is a risk that there may never be a public market for the company’s common stock — an issue s،uld an employee ever be barred from tender events.
SpaceX is one of the most valuable private companies in the world, with the valuation topping out at $180 billion as of last December. Like other private companies, its stock is split into preferred and common stock. Employees are awarded the latter, while preferred stock is generally owned by ins،utional investors and en،ies affiliated with Musk. Preferred stock has some superior rights attached to it, including liquidation preferences and dividends.
The common stock is split into three stock cl،es, Cl، A, B and C. According to an equity incentive plan approved by the SpaceX board in March 2015, and which has a termination date in 2025, employees receive Cl، C stock, a non-voting stock.
منبع: https://techcrunch.com/2024/03/15/،ex-employee-stock-sales-forbidden/