Elon Musk’s SpaceX has taken money directly from 
investors, according to previously sealed testimony, raising new questions about foreign ownership interests in one of America’s most important military contractors.
The recent testimony, coming from a SpaceX insider during a court case, marks the first time direct investment in the privately held company has been disclosed. While there is no prohibition on ownership in US military contractors, such investment is heavily regulated and the issue is treated by the US government as a significant national security concern.
“They obviously have Chinese investors to be honest,” Iqbaljit Kahlon, a major SpaceX investor, said in a deposition last year, adding that some are “directly on the cap table”.
Kahlon’s testimony does not reveal the scope of investment in SpaceX or the identities of the investors. Kahlon has long been close with the company’s leadership and runs his own firm that acts as a middleman for wealthy investors looking to buy shares of SpaceX.
SpaceX keeps its full ownership structure secret. It was previously reported that some investors had bought indirect stakes in SpaceX, investing in middleman funds that in turn owned shares in the rocket company. The new testimony describes direct investments that suggest a closer relationship with SpaceX.
SpaceX has thrived as it snaps up sensitive US government contracts, from building spy satellites for the Pentagon to launching spacecraft for NASA. US embassies and the White House have connected to Starlink too. Musk’s roughly 42% stake in SpaceX is worth an estimated $168 billion. If he owned nothing else, he’d be one of the 10 richest people in the world.
If the investors got access to nonpublic information about SpaceX — say, details on its contracts or supply chain — it could be useful to intelligence.
The new court records come from litigation in Delaware between Kahlon and another investor. The testimony was sealed previously; Kahlon’s testimony was publicly filed this week.
SpaceX has control over who can buy stakes in it, and the company’s investors fall into different categories. The most rarefied group is the direct investors, who actually own SpaceX shares. This group includes funds led by Kahlon, Peter Thiel and a handful of other venture capitalists with personal ties to Musk. Then there are the indirect investors, who effectively buy stakes in SpaceX through a fund run by a middleman like Kahlon. All previously known investors in SpaceX fell into the latter category.
According to testimony from the Delaware case, SpaceX allows investors to buy stakes in SpaceX so long as the money is routed through the Cayman Islands or other offshore secrecy hubs. Companies only have to proactively report investments to the government in limited circumstances, and there aren’t hard and fast rules for how much is too much.
Kahlon’s investor list reads like an atlas of the world. The investors’ names are redacted in the recently unsealed document, but their addresses span from Chile to Malaysia. One is in Russia. At least two are in China. One is in Qatar.
SpaceX’s CFO testified that SpaceX has no formal policy about accepting investments from countries deemed adversaries by the US government. But he said he asks fund managers to “stay away from Russian, Chinese, Iranian, North Korean ownership interest” because that could make it “more challenging to win government contracts.”
By Nov 2021, Kahlon was personally raising money from China to buy SpaceX stakes. He told a Shanghai-based company that if it invested with him, it would get quarterly updates on SpaceX’s business development, “visits to SpaceX, and the opportunities to interview with Space X’s CFO.”
The Shanghai company ultimately sent Kahlon $50 million to invest in Musk’s business, but SpaceX had the deal canceled after the plan became public.
propublica.org/article/elon-m
investors, according to previously sealed testimony, raising new questions about foreign ownership interests in one of America’s most important military contractors.
The recent testimony, coming from a SpaceX insider during a court case, marks the first time direct investment in the privately held company has been disclosed. While there is no prohibition on ownership in US military contractors, such investment is heavily regulated and the issue is treated by the US government as a significant national security concern.
“They obviously have Chinese investors to be honest,” Iqbaljit Kahlon, a major SpaceX investor, said in a deposition last year, adding that some are “directly on the cap table”.
Kahlon’s testimony does not reveal the scope of investment in SpaceX or the identities of the investors. Kahlon has long been close with the company’s leadership and runs his own firm that acts as a middleman for wealthy investors looking to buy shares of SpaceX.
SpaceX keeps its full ownership structure secret. It was previously reported that some investors had bought indirect stakes in SpaceX, investing in middleman funds that in turn owned shares in the rocket company. The new testimony describes direct investments that suggest a closer relationship with SpaceX.
SpaceX has thrived as it snaps up sensitive US government contracts, from building spy satellites for the Pentagon to launching spacecraft for NASA. US embassies and the White House have connected to Starlink too. Musk’s roughly 42% stake in SpaceX is worth an estimated $168 billion. If he owned nothing else, he’d be one of the 10 richest people in the world.
If the investors got access to nonpublic information about SpaceX — say, details on its contracts or supply chain — it could be useful to intelligence.
The new court records come from litigation in Delaware between Kahlon and another investor. The testimony was sealed previously; Kahlon’s testimony was publicly filed this week.
SpaceX has control over who can buy stakes in it, and the company’s investors fall into different categories. The most rarefied group is the direct investors, who actually own SpaceX shares. This group includes funds led by Kahlon, Peter Thiel and a handful of other venture capitalists with personal ties to Musk. Then there are the indirect investors, who effectively buy stakes in SpaceX through a fund run by a middleman like Kahlon. All previously known investors in SpaceX fell into the latter category.
According to testimony from the Delaware case, SpaceX allows investors to buy stakes in SpaceX so long as the money is routed through the Cayman Islands or other offshore secrecy hubs. Companies only have to proactively report investments to the government in limited circumstances, and there aren’t hard and fast rules for how much is too much.
Kahlon’s investor list reads like an atlas of the world. The investors’ names are redacted in the recently unsealed document, but their addresses span from Chile to Malaysia. One is in Russia. At least two are in China. One is in Qatar.
SpaceX’s CFO testified that SpaceX has no formal policy about accepting investments from countries deemed adversaries by the US government. But he said he asks fund managers to “stay away from Russian, Chinese, Iranian, North Korean ownership interest” because that could make it “more challenging to win government contracts.”
By Nov 2021, Kahlon was personally raising money from China to buy SpaceX stakes. He told a Shanghai-based company that if it invested with him, it would get quarterly updates on SpaceX’s business development, “visits to SpaceX, and the opportunities to interview with Space X’s CFO.”
The Shanghai company ultimately sent Kahlon $50 million to invest in Musk’s business, but SpaceX had the deal canceled after the plan became public.
propublica.org/article/elon-m
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Byron Wan
@Byron_Wan
Elon Musk’s SpaceX allows investors from China to buy stakes in the company as long as the funds are routed through the Cayman Islands or other offshore secrecy hubs, according to previously unreported court records.
The rare picture of SpaceX’s approach recently emerged in x.com/Byron_Wan/stat…