The disclosure by Elon Musk on platform X last month regarding the collaboration between SpaceX and AI firm Anthropic, including the claim that the actual duration of the business agreement was shorter than publicly stated, has drawn significant attention. Many investors and industry commentators quickly pointed out that this crucial partnership information was not included in the IPO prospectus SpaceX filed with regulators.
The external scrutiny is justified. Core terms such as "SpaceX having a 180-day revenue guarantee" should have been in the prospectus from the outset. SpaceX later updated its filing to include this information.
This incident brings to mind a series of awkward, and sometimes severe, precedents in IPO history over the past three decades. Having previously authored a book on the evolution of the IPO industry, I noted that such disclosure oversights are well-known cautionary tales among bankers, lawyers, and advisors—professionals who spend their careers helping companies avoid investor lawsuits and SEC scrutiny over disclosure issues.
If this were the end of it, Musk's post would simply join the ranks of controversial public statements from companies like WeWork, Facebook (now Meta), and Alphabet (GOOGL) as another notable disclosure violation. However, long before filing its prospectus, SpaceX and Musk have been challenging an unwritten rule of IPOs: limiting public appearances and being extremely conservative in disclosures to investors during the preparation phase. This ethos has been ingrained since the 1980s when Goldman Sachs pioneered turning the IPO prospectus into a marketing document, fundamentally changing how companies go public.
Renee Jones, a professor at Boston College Law School and former head of the SEC's Division of Corporation Finance, stated, "Broadly speaking, management, underwriters, and lawyers are very cautious about external communications throughout the IPO process because U.S. stock market rules have strict regulations on company communications with the public before and after listing."
Industry observers note that SpaceX's actions during its pre-IPO phase completely depart from the industry's traditionally conservative approach. Based on past patterns, AI giants like OpenAI and Anthropic, which are also preparing for listings, are likely to follow this playbook.
Opening SpaceX's prospectus, the first page declares that management has built "the most ambitious full-stack innovation system on—and off—Earth." Ten pages later, it claims the company's total addressable market is "the largest in human history," citing a valuation of $28.5 trillion, with the figure written out as "trillion."
Such hyperbolic language is pervasive in the document, a style most companies in the past would have deliberately avoided. Jay Ritter, a University of Florida professor who has studied IPOs for decades and maintains extensive listing data, remarked, "I can't think of any other company that would dare to write such exaggerated descriptions in its prospectus."
Furthermore, there have been numerous public interviews. On June 4th, JPMorgan Chase hosted a client event where CEO Jamie Dimon held a live video conversation with Musk. Hundreds of high-net-worth clients gathered at JPMorgan's New York headquarters, and the event was streamed live on X.
An industry insider with experience in dozens of IPOs, who requested anonymity to speak freely, commented, "I have never seen such egregious conduct."
This week, Gavin Baker, a former Fidelity fund manager now at Atreides Management, released an interview video with SpaceX CFO Bret Johnsen, and the official SpaceX IPO website prominently featured a link to it.
Additionally, two days after SpaceX publicly filed its prospectus, a Starship launch promotional video featured a surprise appearance by rapper Nicki Minaj. The prospectus itself is filled with space imagery, reminiscent of the heavily graphic-laden WeWork prospectus from 2019, which ultimately failed and was widely criticized on Wall Street.
The SEC generally discourages promotional public activities before an IPO and explicitly establishes a quiet period: from the public filing of the prospectus until it becomes effective, companies should not engage in promotional communications. Consequently, most management teams avoid live interviews, opting for pre-recorded videos instead. Even during roadshows to institutional investors, where they have more leeway to discuss long-term financial goals, management language remains highly restrained.
A classic case of disclosure misstep occurred before Alphabet's 2004 IPO, when Playboy magazine published an interview with its two founders conducted months earlier. Lawyers and bankers panicked, fearing the SEC would delay the listing. To appease regulators, Alphabet had to append the entire interview to an amended prospectus. Twenty-two years later, this precedent still informs how all listing companies strictly adhere to quiet period rules.
Notably, the current SEC has signaled no intention to restrain SpaceX's behavior. In February, during an appearance on the Dwarkesh Patel podcast, Musk was asked about the IPO. He first stated that one must be "careful about what you say regarding a company planning to list," but then proceeded to discuss SpaceX's commercial plans for deploying data centers in space.
A comment below the podcast transcript hit the mark: "Musk is promoting the SpaceX IPO and talking up the stock." Another comment agreed: "And it's working."
Such promotional public statements risk violating IPO communication regulations, known in the industry as "gun-jumping," which prohibits companies from building market excitement too early. While the communication files between the SEC and SpaceX are not public, and it's unknown if regulators intervened, SpaceX's listing process continues to advance normally.
There are deeper reasons behind SpaceX's audacity to break from IPO traditions. Professor Ritter analyzes that for years, the primary force restraining management's public statements has been external lawyers and underwriters. Under SEC rules, if a company issues misleading information leading to a shareholder class action, both the company and its advisors can be held liable.
In practice, banks and law firms are rarely drawn into such lawsuits; underwriting agreements often include indemnity clauses shifting ultimate risk to the company. However, for risk aversion, intermediaries still strictly control corporate communications.
SpaceX breaks this mold again. Its internal charter imposes multiple restrictions on shareholders initiating lawsuits and requires disputes to be settled through arbitration. In essence, ordinary shareholders lack conventional legal recourse to hold management accountable for material misstatements.
Overall, the series of actions by Musk and SpaceX likely pave the way for giants like OpenAI and Anthropic to test boundaries during their own listings. Musk is known for setting new industry standards that others quickly follow. For instance, after Tesla Motors (TSLA) secured its massive trillion-dollar equity incentive plan, numerous corporate executives soon rolled out similarly large equity compensation packages.
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