Did Musk's SpaceX receive money from Chinese investors?
What's the story
Elon Musk's aerospace company SpaceX has received direct investments from Chinese investors, a recently unsealed testimony has revealed. The revelation came during a court case involving SpaceX and was given by an insider of the company. This is the first time such information about direct Chinese investment in the privately held firm has come to light.
Investor insights
Testimony details
Iqbaljit Kahlon, a major SpaceX investor, testified last year that the company has Chinese investors "to be honest." He further clarified that some of these investors are "directly on the cap table." The term "cap table" refers to a company's capitalization table, which lists its shareholders. However, Kahlon's testimony does not reveal how much money Chinese investors have put into SpaceX or who they are.
Ownership secrecy
Ownership structure remains undisclosed
SpaceX has kept its full ownership structure under wraps. Earlier reports had suggested that some Chinese investors had taken indirect stakes in the company by investing in middleman funds that owned shares in SpaceX. However, this new testimony reveals direct investments, indicating a closer relationship between these investors and the aerospace firm.
Security concerns
National security concerns
SpaceX has flourished by securing sensitive US government contracts, including building spy satellites for the Pentagon and launching spacecraft for NASA. However, national security law experts say federal officials would be very interested in understanding the direct Chinese investment in SpaceX. If these investors got access to nonpublic information about the company, like details on its contracts or supply chain, it could pose a risk to national security.
Investment strategy
Categories of investors at SpaceX
SpaceX controls who can buy stakes in it, with investors falling into different categories. The most exclusive group is the direct investors, who actually own SpaceX shares. This group includes funds led by Kahlon, Peter Thiel, and a few other venture capitalists with personal ties to Musk. Then there are indirect investors, who buy stakes via a middleman like Kahlon. All previously known Chinese investors in SpaceX were part of this latter category.
Investment policy
SpaceX's approach to foreign investments in sensitive industries
SpaceX CFO Bret Johnsen testified that the company has no formal policy about accepting investments from countries deemed adversaries by the US government. However, he said fund managers are asked to "stay away from Russian, Chinese, Iranian, North Korean ownership interest" as it could make winning government contracts more challenging. This indicates a cautious approach toward foreign investments in sensitive industries like aerospace technology.