One of the crimes listed is “an act of dishonesty against the company.”
Sources and internal documents seen by TechCrunch say that SpaceX makes its workers agree to some strange rules about their stock awards, which makes them less likely to work there.
There is a clause in that agreement that lets SpaceX buy back vested shares within six months of an employee quitting the company for any reason. SpaceX also lets itself keep current and former workers from taking part in tenders if, among other things, they are found to have done “an act of dishonesty against the company” or broken written company policies.
One former worker said that employees don’t always know about the “dishonesty” condition when they first sign up for the equity compensation management tool.
If SpaceX employees aren’t allowed to sell stock in the tender offers, they would have to wait until SpaceX goes public to get cash from the shares. It’s not clear when that will happen, if it ever does.
SpaceX did not answer any of the many requests for feedback.
The Shares That Employees Own Are Taxed.
To get the best employees, SpaceX, like most tech companies, offers stock options and restricted stock units (RSUs) as part of its pay. Some 13,000 people work for SpaceX and are trying to push the limits of what people thought was possible in space. For example, they are building the largest constellation of satellites ever seen by humans and transporting people to and from the International Space Station.
Private company stock can’t be sold without the company’s permission, but public company stock can. This means that workers can only cash in that part of their pay when their boss lets them. SpaceX is known for holding “buyback events” twice a year, which means that the company will buy back shares from employees. This schedule has been pretty reliable over the past few years, giving employees twice a year to sell assets that have probably gone up in value since the vesting date.
At startups, it’s normal for employee stock compensation to come with extra terms. Also, employees who stay with the company long enough to vest stock may have bought stock under different stock plans with different conditions. However, employees of private and new businesses are not allowed to sell their stock without permission from their boss.
SpaceX did say that if an employee was fired “for cause,” the company would buy back their stock for $0 per share, according to papers that TechCrunch saw.
Lawyer and stock options expert Mary Russell told TechCrunch, “It sounds strange to have a cause type exclusion provision in a tender offer agreement.” She also said it is rare for a standard venture-backed startup to have the right to buy back fully paid-up shares that have nothing to do with a “for cause” termination for bad behavior.
One former worker said that these terms “keep everyone under their control, even if they have left the company.” This is because workers don’t want to be made to give up their valuable SpaceX stock for no pay. “Being banned from tender offers also wipes out your shares, at least for a long time, since SpaceX doesn’t need to go public right away.” Even though you paid a lot of money in taxes.
“When you leave, they try to get you to sign a non-disparagement agreement with a stick or a carrot,” the person said.
The things Elon Musk does are seen as a “risk factor” by SpaceX.
Up until 2020, SpaceX also gave its workers a separate document that explained the risks of investing in the company’s stocks. It sounds a lot like an S-1 registration statement that public companies have to file. Since SpaceX is private, this is the only way for the company’s risk profile to be made public.
A lot of the time, these kinds of documents are made to keep the company from being sued. The SpaceX document correctly points out that investing in stocks is naturally risky since people are trading a very liquid asset (cash) for a very immobile asset (shares). So, they list all the important risk factors, even if they don’t seem likely. For example, SpaceX’s risk document, which TechCrunch saw, says that Hawthorne, California, where its offices are located, is a “seismically active region.”
There are also some risks that come from Elon Musk, who is the CEO and founder of the company.
According to the document, “to date, the Company has been very dependent on the leadership provided by the Company’s founder, CEO, and CTO, Elon Musk.” “SpaceX, Mr. Musk, and other businesses that Mr. Musk is connected with often get a huge amount of media attention.” So, Mr. Musk’s acts or public statements could also have an effect on the market value of SpaceX, either for better or for worse.
It also talks about a $40 million settlement between Musk and the SEC. This happened after Musk wrote in August 2018 that he was thinking about taking Tesla private. The paper says that “the settlement has implications for SpaceX,” even though the tweet had nothing to do with SpaceX.
“If Mr. Musk doesn’t follow through with the settlement, more enforcement actions or other legal proceedings could be brought against him, which could be bad for SpaceX.” It’s most likely that the SEC would not let SpaceX use Regulation D, which is an exception from registration under the Securities Act of 1933 for private funding deals. If the company can’t rely on Regulation D in the future, it might be harder for them to raise money in the future.
Tesla’s most recent securities statements talk about the SEC settlement, but they don’t talk about possible media attention in the same clear way.
The paper also says there is a chance that the company’s common stock will never be sold on the open market. This could be a problem if an employee is ever banned from tender events.
SpaceX is one of the world’s most valuable private companies. In December of last year, it was worth a record $180 billion. Its stock is split into preferred stock and regular stock, just like the stock of other private companies. The second type is given to employees, while big investors and businesses connected to Musk usually own preferred stock. Preferred stock comes with better rights than common stock, such as dividends and choice in liquidation.
Read Read: How Does Elon Musk’s Grok Robot Work?
There are three different types of common stock: Class A, B, and C. Employees get Class C stock, which is a type of stock that doesn’t give you voting rights, under an equity incentive plan that was passed by the SpaceX board in March 2015 and ends in 2025.
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