Say what you will about Elon Musk, the man has an uncanny ability to attract eyeballs, and his gargantuan SpaceX IPO, which priced last night, is the latest example of that. Like everything Elon does, this deal is incredibly controversial, and for good reason. Let’s just check off a few of the hot debating topics, shall we?
– Valuation. The IPO’s initial public offering price values SpaceX at $1.77 trillion, which is a mere 100x revenue. NYU’s valuation guru Aswath Damadoran says it’s worth more like $1.25 – $1.35 trillion. Morningstar throws the proverbial turd in the punchbowl and says it’s worth $780 billion, or less than half the IPO valuation – and they’re far from the only valuation skeptic. Who’s right? The answer to that question should play out over the course of the next several months, because to paraphrase Rasheed Wallace, “Aftermarket Don’t Lie.”
– Uh, About the Aftermarket. . . Buckle your seatbelts. This deal is expected to have one of the most volatile aftermarkets in history. Even though this will be the largest IPO of all time, it only represents about 5% of SpaceX’s outstanding shares, and that small float is usually a recipe for volatility. Despite the sky-high valuation, it looks like there’s reason to expect a big opening day pop, but how the stock performs over the next several months is anybody’s guess.
– OutsizedRetail Allocation. One of the things you can usually count on with an IPO is that if it reaches down into the lower rungs of retail investors, it’s because there’s not enough smart money demand for the deal. In this case, SpaceX took the unusual step of locking in a price last week, and allocating up to 30% of the deal to retail investors. That put the squeeze on the banks to get investors to sign up for a price that’s locked in at a very high valuation despite, among other things, the past week’s tech rout, and they’re responding with unprecedented outreach to retail. Based on recent reports, it looks like institutional demand may well eat into that allocation, but if retail does end up with 30% of the deal and it tanks, it won’t take long for the politicians to get their knives out for everyone involved.
– Must Love Musk. Anyone who buys SpaceX stock should realize that although the company has a board of directors, its role is purely decorative when it comes to control over the Mercurial Mr. Musk. That’s because, as the prospectus discloses, “removal of Mr. Musk from his board and leadership roles (Chief Executive Officer and Chairman of our board) requires the approval of the holders of at least a majority of the voting power of the outstanding shares of Class B common stock, voting separately as a class.” I’ll give you three guesses as to who owns over 90% of the Class B common stock, and the first two don’t count.
– Prospectus “Sizzle” Aplenty. Meredith has already weighed in on what a great beach read this 277-page prospectus would make, but what struck me – as it usually does with IPOs – was the mission statement. This is going to sound like an old man yelling “get off my lawn!” but on behalf of those of us whose understanding of the IPO process is based mostly on 20th Century experience, I’ve got to ask – when did it become okay for companies to include overheated mission statements like what’s set forth below in their prospectuses?
Our mission is to build the systems and technologies necessary to make life multiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars. To do this, we have formed the most ambitious, vertically integrated innovation engine on (and off) Earth with unmatched capabilities to rapidly manufacture and launch space-based communications that connect the world, to harness the Sun to power a truth-seeking artificial intelligence that advances scientific discovery, and ultimately to build a base on the Moon and cities on other planets
If you fed this into Elon’s Grok and asked it to summarize it in one sentence, my bet is that it would come up with something very much like “To Infinity – And Beyond!” Elon’s definitely channeling his inner Buzz Lightyear with this one. And don’t even get me started on the photos – we old folks used to laughingly use rocket ships blasting off as the classic example of prospectus graphics that were certain to be non-starters with the Corp Fin reviewers. This prospectus has 18 pages of them!
As my investment banker friends might say, this deal obviously has “a lot of hair on it,” but you can also understand why it’s gotten so much hype. Take Morgan Stanley’s prediction that this company’s going to do $3.4 trillion in revenue and $2.7 trillion in EBIDTA by 2040, for example. I’ve also got to concede that while I’m not fond of Elon Musk, SpaceX has done things that are so mind-boggling that they’ve literally made my jaw drop.
It’s going to be fascinating to see how all this unfolds – can SpaceX live up to the hype and reach “To Infinity and Beyond!” – or will the aftermarket be a major buzzkill? Stay tuned.
I highlighted one of the significant governance concerns about SpaceX in today’s lead blog, and there are plenty more where that came from. Since that’s the case, it’s not surprising to see that The CII & a group of mostly public-sector investors have submitted their customary objections to the governance practices of the latest hot dual class IPO.
Those objections notwithstanding, we’ve also come to expect that most institutional investors will stick to their strategy of “buy now, whine later” when it comes to hot issues. In the case of SpaceX, the WSJ reported yesterday that BlackRock lobbed in a $5 billion order, and that other big investors were likely to follow suit, so it appears that there aren’t going to be many major institutions growing a spine this time around either.
I’m also eagerly awaiting the inevitable next stage – complaints that regulators or stock exchanges need to ride to the rescue of institutional investors, who despite sitting on the world’s largest pile of money, say they’re incapable of doing anything about offerings whose governance provisions they find objectionable.
I guess I’m somewhat sympathetic to the index funds that will be forced to buy SpaceX shortly after the IPO, although because most buy based on float-adjusted market cap, even this humungous offering isn’t going to result in any index fund holding enormous quantities of SpaceX stock, at least at first.
As for the rest of you guys, if you don’t like Elon or SpaceX’s governance, either don’t buy the stock or buy it and plan on playing the long game. After all, there’s evidence that investors can sometimes wear these dual class founders down. Don’t think that will work with SpaceX? Then see option 1.
If you watched Game 4 of the NBA Finals on Wednesday night, you witnessed one of the most improbable comebacks in NBA history. Now, even I can’t come up with the slightest connection between The Wu-Tang Clan’s halftime show and the securities laws, but I’m going to blog about their impact on the game anyway.
It’s apparent that not only did the guys wow the Garden with their halftime performance, but they channeled their inner Knute Rocknes to provide second half inspiration for the Knicks as well. Don’t take my word for it – here’s how yesterday’s New York Times summed up The Wu-Tang Clan’s performance:
Stat of the game: Wu-Tang finished plus-28 on the night.
Some fans are attributing the Knicks’ win to Taylor Swift. I’ll let our resident Swiftie Dave Lynn make that argument if he wants, but I know what I saw. Now if I can just figure out a way to get them to show up at a Cleveland Browns game. Have a great weekend, everybody!
The WSJ reported earlier this week that predictions market operator Kalshi is tightening its security measures and asking some traders to identify their employers in response to concerns about insider trading. This Sidley blog says that it’s time for public to tweak their own insider trading policies to address the issues presented by prediction markets, and for other organizations to implement formal policies of their own. This excerpt explains the rationale for that position:
Historically, insider trading compliance programs were implemented only at publicly traded companies and focused primarily on securities transactions involving publicly traded stock. Because the use of online prediction markets is a relatively new phenomenon, those programs have not explicitly addressed prediction market activity.
In addition, prediction market trading may involve contracts unrelated to publicly traded securities and may implicate confidential information held by private companies, nonprofits, universities, healthcare systems, government contractors, and other organizations that historically may not have maintained formal insider trading policies. As a result, employees and other personnel at public or private companies may incorrectly assume that existing restrictions on the misuse of confidential or proprietary information do not apply to prediction market activity, creating potential ambiguity and increased compliance risk for organizations.
The blog goes on to make specific recommendations for actions that public companies and other organizations should take to appropriately update existing insider trading policies or to include in newly adopted policies to address prediction markets.
Data centers increasingly play a key role in corporate investment, construction, procurement and utilization decision-making, and the issues associated with data center governance should be addressed at the board level. A recent Weil memo highlights some of the key questions boards should be asking about data center governance. Here’s an excerpt:
1. Strategy and Operations. How do data centers tie into the company’s strategy and operations (e.g., do we build, lease, invest, finance, supply), what is the interplay between data centers and our AI strategy, and how do we expect data centers to meet our computing power needs now and in the future? What is the expected obsolescence of the data centers that the company has built, contracted for or otherwise invested in, and are we in a position to retool/retrofit if needed?
2. Monitoring Performance and Oversight. Who on the management team is responsible for data center-related activities and how are those activities factored into their compensation? What financial metrics and other information are they expected to report to the Board and how regularly? Do we have an information reporting system in place to surface issues to the Board as appropriate? Do we have a Board committee tasked with oversight of data center-related matters and do our minutes and materials reflect that?
3. Risk Oversight. Do we understand the risks involved with our data center activity and how the company manages and mitigates those risks? Are those risks built into our enterprise risk management framework, business resiliency plans and policies, and risk oversight processes? (Examples of key risks include power source problems, interconnection delays/latency, community opposition, obsolescence and events that could impact operations such as security or cybersecurity breach, natural disaster, extreme weather, war or terrorist attack.)
4. Delegation of Authority. What data center-related agreements are required to come to the Board for approval? Is this clear under our delegation of authority (e.g., because they involve expenditure over a certain amount or are otherwise material)?
5. Disclosure. What disclosures about data centers have we made in our public filings and other documents, and are the company’s disclosure controls and procedures up to date? What are our peer companies disclosing about data centers?
Other areas of inquiry for the board of directors identified by the memo include sustainability issues, regulation and compliance, governmental relations and shareholder engagement concerning data center-related activities.
I’ve only visited Orlando once, when my parents took our family to Disney World over Christmas 1998. Our kids were ages 6, 5 and 3 at the time, and even though they were a little young, everyone had a great time. What I remember most about the experience was the efficiency with which the folks at Disney separated me from the contents of my wallet as we wandered around the parks. My kids were having so much fun that I didn’t even feel it – well, at least not until January, when the Visa bill arrived.
If you want to hold onto the contents of your wallet a little more tightly than I was able to, be sure to sign up now for our 2026 Proxy Disclosure and Executive Compensation Conferences on October 12th & 13th in Orlando to take advantage of our discounted “early bird” rate. With an agenda featuring two days of fast-paced, topical panels, an all-star speaker lineup, and Dave Lynn’s interview with Corp Fin’s Deputy Director Christina Thomas, attendees will receive critical insights into the latest SEC rulemaking initiatives and developments in governance, disclosure practices, activism & shareholder engagement, and executive compensation.
The folks at the SEC have made it clear that they’re not planning to stand still over the next few months, and we won’t be either. We’ll tweak our agenda as necessary to ensure that ensure that we’re bringing you the most up-to-date information on the SEC initiatives that mean the most to you and your clients.
Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Do it today so you don’t miss out on our discounted “early bird” rate!
This recent PwC report that details Staff comment letter trends for Form 10-K and Form 10-Q filings. The report identifies the 10 most common topical areas for Staff comments during the period from April 1, 2025 through March 31, 2026, and includes both an analysis of the Staff’s inquiries and sample comments. Here’s an excerpt from the report’s discussion of MD&A comments:
The SEC staff’s comments on management’s discussion and analysis have emphasized the requirements in Item 303 of Regulation S-K and the related disclosure objectives, including a focus on:
– The discussion and analysis of results of operations, including the description and quantification of each material factor, offsetting factors, unusual or infrequent events, and economic developments causing changes in results between periods
– The discussion of known trends or uncertainties that are reasonably expected to impact near- and long-term results (e.g., supply chain disruptions, inflation, increase in interest rates)
Metrics used by management in assessing performance, including how they are calculated and period over period changes
– Critical accounting estimates, including the judgments made in the application of significant accounting policies, sensitivity to change, and the likelihood of materially different reported results if different assumptions were used
– Liquidity and capital resources, including clear discussion of drivers of cash flows and the trends and uncertainties related to meeting known or reasonably likely future cash requirements.
The other topical areas included in PwC’s report are non-GAAP measures, segment reporting, revenue recognition, debt, quasi-debt, warrants and equity, goodwill and other intangibles, business combinations, disclosure controls and ICFR, research and development, and inventory and cost of sales. A separate section of the report also explores industry-specific comment trends.
I think most of us who’ve drafted disclosure for public companies over the years have resigned ourselves to the fact that, aside from the plaintiffs’ bar & a few other folks who get paid to review corporate disclosures, pretty much nobody else reads them – including most investors. Since that’s the case, the question becomes, “What’s the point?” A recent CLS Blue Sky Blog post discussing a new paper, “The Hidden Work of Disclosures” takes a stab at answering that question.
Although the paper approaches this issue from the perspective of mutual funds, I think much of what the authors say has relevant to those who work on the corporate side. They argue that the discipline of disclosure strengthens internal governance, and that this pays dividends to investors whether they read those disclosures or not. This excerpt summarizes their argument on the governance benefits of disclosure:
First, disclosure empowers lawyers.Funds typically assign responsibility for drafting and revising disclosures to fund counsel, and that designation is consequential. Stewardship of the disclosure process elevates the authority of lawyers within organizations that financial professionals would otherwise dominate. SEC-enforced disclosures give lawyers the authority to rein in straying portfolio managers and to say, “This is in your prospectus.… This is how it’s disclosed to shareholders, and this is what we need to do.”
Second, disclosure builds a culture of compliance. Drafting a prospectus and updating it annually is a cross-department exercise recruiting portfolio managers, risk teams, accountants, marketing personnel, compliance officers, and independent trustees into periodic collaborations. Leading this process, in-house lawyers and outside counsel work collaboratively, discerning SEC priorities and requirements for internal teams and translating complex financial frameworks for external audiences.
In-house lawyers acquire the character of “good inspectors” rather than enforcement cops, building trust and gaining access to information, while anticipating problems before they arise. Outside counsel provide an industry-wide view by benchmarking funds’ practices against market trends, which tells funds whether they are safely “in the antelope herd” or “about to get picked off by the lions.” Compliance culture isn’t about altruism. A fund’s reputation for doing the right thing is a highly prized asset that establishes its status within the industry, the trust that the SEC has in the fund, and most important, its brand value among investors.
Disclosure forces institutional learning. Annual reviews compel funds to revisit their disclosures, kick the tires, and reconcile public representations with operational reality. Interviewees described disclosures as the “blueprint,” the “playbook,” and “gold standard,” guiding fund operations from top to bottom with current information. Lawyers, in turn, cross-pollinate among funds—sharing best practices related to disclosure drafting and revision through bar committees, trade associations, law firms, and professional contacts. Disclosure language and compliance methods spread through this network, producing a degree of industry-wide convergence that command-and-control regulation alone could not deliver.
Over on The Business Law Prof Blog, Prof. Ann Lipton cites this paper in support of her opposition to the SEC’s semiannual reporting proposal. As she puts it, “a switch to semi-annual reporting may not simply mean less information to investors; it loosens the obligations of boards, and managers, to oversee the company.”
Meaghan Nelson continues to blog up a storm over on “The Mentor Blog,” which is available to members of TheCorporateCounsel.net. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply clicking the link on the left side of the blog and entering their email address. Here are some of Meaghan’s recent entries:
You’ll love Meaghan’s stuff – she brings a unique perspective to our team and is confronting many of the same challenges a lot of our members face in juggling a career in corporate law with the responsibilities of a young family. I think we probably get more positive feedback from our members on Meaghan’s blogs than just about anything else on the website. If you’re not reading her blogs, you’re missing out!
The SEC’s recent semiannual reporting proposal has given public companies and their lawyers plenty to think about and so has Nasdaq’s decision to move to 23/5 trading later this year. One of the big questions that people are asking is “what’s everyone else planning to do?” To help answer that question, we’ve put together this 18-question anonymous survey in collaboration with our friends at Fenwick & West and Orrick.
This one’s a little longer than our typical quick survey, but it covers a lot of ground, including the likelihood of adopting semiannual reporting, anticipated changes in disclosure practices, insider trading policies, and reactions to Nasdaq’s extended trading hours.
We expect that this anonymous, multiple-choice survey will take you about 10 minutes to complete, and we’ll share the results on this website. You don’t have to be a member of TheCorporateCounsel.net to take the survey, so we invite all of our readers to take a few minutes to complete it. We think you’ll find that it’s worth the effort!
