Securities Regulation Daily Wrap Up, INITIAL PUBLIC OFFERINGS—CII implores Musk to shore up SpaceX governance ahead of IPO, (Jun 10, 2026)

By Anne Sherry, J.D.

The group asked for a meeting to discuss the need for “one share, one vote” and other governance musts.

The Council of Institutional Investors wrote to Elon Musk and the SpaceX board with concerns over the governance structure of the soon-to-be-public company. CII urged the company to go public with a single class of voting stock rather than the proposed structure that gives Musk ten times the voting power per share as public stockholders. The letter also takes issue with other governance provisions, such as requiring derivative plaintiffs to hold at least 3 percent of voting shares, amounting to billions of dollars’ worth.

One share, one vote. CII led with what it called a bedrock principle of good governance: a single class of voting stock that keeps the board accountable to public shareholders. This was the first policy CII adopted when it was formed in 1985.

In contrast, SpaceX proposes two classes of common stock, with Class B carrying ten votes per share to the one vote for the public Class A shares. Holders of Class B stock would be entitled to elect—and remove—a majority of directors for as long as a single share of Class B remains outstanding. With a majority of the Class B shares and a majority of overall voting power, Musk would control the election of the board and the outcome of substantially all matters submitted to a shareholder vote.

“The result is that purchasers of Class A common stock in this offering would have little or no voice in the governance of the Company, even as their economic stake grows over time,” CII wrote.

At a minimum, CII would like to see the multi-class structure convert to one share, one vote within a certain time period. The group generally advocates for this to occur within seven years of an IPO, and it tracks so-called Dual-Class Enablers: directors that approve non-sunsetting (or longer-sunsetting) dual-class structures at the IPO stage.

Board and committee independence. CII noted that SpaceX is proposing to have Musk serve as combined Chairman, CEO and CTO and that he could be removed from the board and executive positions only by the Class B shares he controls.

CII’s policies call for two-thirds of the board and all members of the auditing, nominating, and compensation committees to be independent. The board should be chaired by an independent director, and the roles of CEO and chair should be combined only in limited circumstances and where a lead independent director is designated to maintain balance between the powers of the CEO and those of the independent directors.

Shareholder rights. The letter also objects to the IPO’s restrictions on shareholder rights.

CII takes issue with SpaceX’s reincorporation to Texas in the first place. “CII policy provides that companies should not reincorporate in jurisdictions where corporate governance structures are less robust, and should not adopt articles or bylaws that diminish investor rights and protections in conjunction with a reincorporation.”

Specifically, the group says that the restrictions—forum-selection and mandatory-arbitration clauses, a 3-percent ownership threshold to bring a derivative suit, and a requirement that shareholder proponents solicit holders of at least 67 percent of the voting power—contravene several CII policies.

According to those policies, good governance means shareholders can submit and vote on proposals as a fundamental right and can litigate meritorious claims, and supermajority votes are not required.

Conflicts. CII notes that Musk and certain directors, and their affiliates, will have no duty to avoid competing with SpaceX and that SpaceX will continue its significant dealings with Musk-affiliated entities. In addition to adopting robust procedures to identify, disclose, and review conflicts, SpaceX should reconsider the breadth of the proposed renunciation of corporate opportunities.

Lock-up structure. Finally, the group examined SpaceX’s proposed lock-up structure and concluded that it will materially shorten the period during which public investors can exercise their rights under Securities Act Section 11.

A conventional 180-day lockup preserves traceability by keeping unregistered, restricted securities out of the market. The SpaceX registration statement allows sales of some such shares as soon as two or three months after the IPO, depending on the timing of the Q2 2026 earnings release. Additional shares become saleable if the Class A shares reach a strong price target, precisely when new investors are likely to buy.

“For CII members, this compresses the period in which they can purchase shares that remain traceable to the prospectus, and correspondingly shrinks the window in which they retain a meaningful remedy should the registration statement prove to contain a material misstatement or omission,” the group writes.

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