Major institutional investors are rejecting SpaceX's upcoming initial public offering, citing not just overvaluation but also deep concerns about how Elon Musk's control of Grok and other companies creates governance risks that could harm shareholder protections. AkademikerPension, a Danish pension fund managing $25 billion in assets, has announced it will boycott the IPO despite SpaceX's massive $1.8 trillion valuation target. The decision signals growing unease among long-term investors about how Musk's sprawling business empire, which now includes the AI chatbot Grok following SpaceX's acquisition of xAI in February, complicates corporate oversight.

What's Driving the Pension Fund's Rejection?

AkademikerPension's chief investment officer, Anders Schelde, stated that the fund views SpaceX as not only grossly overvalued but also structurally flawed from a governance perspective. According to independent calculations by the fund, SpaceX cannot reasonably exceed a valuation of $1 trillion, making the current asking price unjustifiable from an investment-return standpoint.

The governance concerns run deeper than valuation disagreements. SpaceX's corporate structure would grant Musk roughly 80 percent of the company's voting rights while he simultaneously serves as chief executive, chief technology officer, and chairman of the board. This concentration of power, combined with the February acquisition of xAI and the Grok chatbot, creates a web of interconnected entities that makes independent oversight nearly impossible.

"Even if the financial valuation were reasonable, the fund would still feel compelled to exclude SpaceX from its portfolio," Schelde emphasized, noting that the governance structure alone justifies the decision.

Anders Schelde, Chief Investment Officer at AkademikerPension

How Are Other Major Investors Responding to SpaceX's Governance Structure?

AkademikerPension is not alone in raising red flags. New York City Comptroller Mark Levine, alongside New York State Comptroller Thomas P. DiNapoli and California Public Employees' Retirement System CEO Marcie Frost, sent a joint letter to SpaceX executives in May expressing serious objections to the proposed governance structure. These three officials collectively represent over $1 trillion in assets under management for millions of public servants, including teachers, firefighters, police officers, and nurses.

The institutional investors identified several specific governance risks that concern them:

• Super Voting Shares: A select few shareholders, primarily Musk, would hold disproportionate voting power that cannot be challenged or diluted through normal corporate mechanisms.
• Mandatory Arbitration: Shareholder disputes would be forced into private arbitration rather than public courts, limiting transparency and accountability.
• Executive Accountability Barriers: The structure creates nearly insurmountable obstacles to holding executives accountable for their decisions and actions.
• Shareholder Legal Restrictions: Limits on shareholder legal actions would leave investors with virtually no recourse over how the company conducts business.

"Sound governance is fundamental to a company's long-term success, and we are concerned about the many glaring governance red flags including a lack of genuine checks and balances for Elon Musk as CEO," Levine stated.

Mark Levine, NYC Comptroller

Why Does the Grok Acquisition Matter to Investors?

The February acquisition of xAI, which includes the Grok AI chatbot, by SpaceX adds another layer of complexity to investor concerns. The deal valued SpaceX at $1 trillion and xAI at $250 billion, effectively merging the aerospace company with Musk's artificial intelligence venture and the social media platform X. For pension funds and institutional investors focused on long-term value, this consolidation raises questions about how resources flow between entities and whether Musk's attention is divided across too many high-stakes ventures.

The integration of Grok into SpaceX's corporate structure exemplifies the governance problem that critics highlight. Investors cannot easily separate the performance and risks of the AI business from the aerospace operations, yet both fall under Musk's unified control with minimal board oversight. This interconnection makes it difficult for shareholders to assess risk or demand accountability for decisions that affect multiple business lines.

What Do Institutional Investors Say About the Risk Premium?

AkademikerPension warned that investors are being asked to accept an unprecedentedly low risk premium for a highly uncertain company. In other words, the financial returns being offered do not adequately compensate investors for the governance and operational risks they would be taking on. The fund noted that pricing appears to be driven more by Musk's public narratives and brand appeal than by actual economic fundamentals or realistic growth projections.

"The current proposed structure makes it nearly impossible to ensure strong safeguards are in place to preserve the company's financial and reputational value, limits transparency, thwarts the opportunity for accountability, and overall, dangerously undermines investor rights," DiNapoli observed.

Thomas P. DiNapoli, New York State Comptroller

The comptrollers emphasized that as SpaceX prepares to occupy a position of systemic importance in the public markets, its governance must adhere to baseline protections that long-term institutional capital depends on. Without meaningful reforms to the governance structure, major pension funds and public employee retirement systems are likely to sit out the IPO, potentially limiting the pool of institutional capital available to SpaceX at launch.

SpaceX officially filed for its IPO on May 20 and is scheduled to begin formal marketing efforts in the coming weeks. The pushback from major institutional investors suggests that the company may face significant headwinds in convincing long-term capital holders to participate, regardless of the company's technological achievements or market opportunity.