SpaceX IPO Filing Draws Investor Scrutiny Over xAI Omissions (1)

SpaceX left out key details about its acquisition of artificial intelligence startup xAI in its regulatory filing to go public, hindering investors’ ability to make fully informed decisions about the company, a shareholder group told the Securities and Exchange Commission on Tuesday.

Space Exploration Technologies Corp.'s financial paperwork doesn’t mention the exodus of xAI co-founders following the Feb. 2 deal, SOC Investment Group said in a letter to SEC Chairman Paul Atkins and the agency’s commissioners. The rocket, satellite, and artificial intelligence company listed June 12 with an initial public offering that raised $75 billion and turned founder Elon Musk into the world’s first trillionaire.

The staff churn surrounding the acquisition should have prompted analyses about whether the value of xAI’s assets were affected, the shareholder group said.

The deal gave xAI a value of $250 billion, Bloomberg News has reported. Previously, xAI had bought Musk’s social network, X.

The letter comes as the SEC under Atkins aims to ease the process for companies to go and stay public. With tech giants OpenAI and Anthropic now preparing for their own IPOs, the shareholder group urged the SEC to ensure it thoroughly vets companies in its review process.

SOC Investment Group, an adviser to union-affiliated pension funds, doesn’t own any stock in SpaceX. It has previously cautioned investors about purchasing SpaceX stock, saying the company’s governance policies weaken avenues to hold management accountable. The group urged the SEC in May to review SpaceX’s financial disclosures for accuracy and ensure its auditor—named in its SEC filing as PricewaterhouseCoopers LLP—remains independent.

SpaceX didn’t disclose in its June 3 amended registration form, called an S-1, that most of xAI’s co-founders left the startup between February and late March, Tuesday’s letter said. It pointed specifically to SpaceX’s disclosure of so-called subsequent events, which included discussions of the xAI deal closing in February.

SpaceX’s filing also didn’t mention a March social media post in which Musk said that xAI is “being rebuilt from the foundations up” after the departures sparked uncertainty about the employee turnover, SOC Investment Group wrote.

An accounting process known as impairment testing could be appropriate given the xAI staff departures and Musk’s statement about the need to rebuild, but SpaceX’s disclosures didn’t “discuss any consideration of testing xAI assets for impairment,” the letter said.

Impairment represents a significant, unexpected decline in an asset’s recoverable value that prompts recognition in corporate financial reports.

SpaceX acknowledged in the section of its filing focused on risk factors that successfully integrating acquired businesses “is inherently complex, costly and time-consuming.” The company continues to undertake “changes in personnel, strategic partnerships, infrastructure-sharing arrangements, organizational restructurings, acquisitions and other integration initiatives” related to its AI capabilities, the filing said.

SEC staff review filings and can provide comments on companies’ disclosures. SOC Investment Group said it is anticipating the publication of the SEC’s comments on SpaceX’s registration statement “to see if questions were raised concerning impairment testing, and how it concluded that no such testing should have been performed and reported prior to the publication of the S-1.”

Moving forward, the group stressed the importance of investor protection, noting that “nothing will chill future IPOs more than investors taking losses because ‘bad news’ known to the SEC was not properly disclosed.”

The SEC declined to comment on a specific company. SpaceX didn’t immediately respond to a request for comment.