SpaceX’s stock awards come with unusual terms that can have a negative impact on employees, as revealed by sources and internal documents seen by TechCrunch.
One such term allows SpaceX the option to buy back vested shares within six months of an employee leaving the company for any reason. SpaceX also reserves the right to prevent current and former employees from participating in tender offers if they are found to have acted dishonestly against the company or violated company policies, among other reasons.
Many employees are unaware of the “dishonesty” clause when they first sign up for the equity compensation management platform, according to a former employee.
If an employee is barred from selling stock in tender offers by SpaceX, they must wait for the company to go public to cash in their shares – a timeline that is uncertain.
SpaceX did not respond to requests for comment.
Stock Taxes for Employees
Similar to other tech companies, SpaceX offers stock options and restricted stock units (RSUs) as part of its compensation package to attract top talent. This has proven successful with SpaceX’s workforce contributing to groundbreaking achievements in aerospace, such as crew missions to the International Space Station and the creation of a major satellite constellation.
Unlike public company stock, private company stock cannot be sold without the company’s approval. Employees can only convert this portion of their pay into cash when permitted by their employer. SpaceX typically conducts buyback events twice a year, providing employees with opportunities to sell shares that have likely increased in value since vesting.
Additional conditions are often attached to stock compensation at startups, and at SpaceX, termination “for cause” could result in the company repurchasing an employee’s stock at $0 per share.
Such terms prevent former employees from selling their valuable SpaceX stock without compensation, leading to a prolonged waiting period for potential liquidity. Non-disparagement agreements are also enforced upon departure from the company.
Risks Associated with SpaceX
In 2020, SpaceX issued a risk disclosure document to employees outlining the potential hazards of investing in the company’s securities. This document mirrors a public company’s S-1 registration statement and sheds light on SpaceX’s unique risk profile as a private entity.
Risks highlighted in the document include the company’s dependency on Elon Musk’s leadership and potential market impact from his actions and statements. The document also references a $40 million SEC settlement with Musk and the implications it has for SpaceX’s regulatory standing.
Moreover, uncertainties around a public market for SpaceX’s common stock and the splitting of stock classes – Class A, B, and C – indicate potential challenges for employees in accessing liquidity events.
