MW Elon Musk ditched California, but the state will get a much-needed win from SpaceX's IPO
By William Gavin
Musk stormed out of the state and took the headquarters of SpaceX and Tesla with him. But many current and former employees still call it home.
Elon Musk turned his back on California, the birthplace of SpaceX and Tesla, and has been critical of the state's policies and politics. But California is still expected to be one of the biggest winners of SpaceX's massive public listing.
SpaceX's initial public offering will likely be the biggest in history and will spark a massive liquidity event for shareholders. The company is angling to raise as much as $80 billion at a valuation of up to $2 trillion next month, according to the Wall Street Journal and Bloomberg.
Musk personally left California several years ago and also moved the headquarters of both SpaceX and Tesla $(TSLA)$ out of the state. But Musk's business interests maintain deep and longstanding ties to California. Many current and former SpaceX employees live and work there, which means the state is likely to receive a tax windfall connected to the IPO.
Chris Hoene, the executive director of the California Budget and Policy Center, recently told MarketWatch that revenue from SpaceX's IPO, or from the potential IPOs of OpenAI and Anthropic, could help mitigate cuts to state programs. California and many other states tax income from investments, primarily through capital-gains taxes, or the profit investors realize when they sell their shares.
Last week, California Gov. Gavin Newsom released his revised budget proposal, which uses a tax windfall to help wipe out California's deficit over the next two fiscal years.
Newsom's proposal includes a $15.7 billion upgrade from his previous budget as a result of higher capital-gains revenue and stock-based compensation. That's tied to the booming stock market and enthusiasm around artificial intelligence. But both the governor's office and the California Legislative Analyst's Office have warned that those gains may be unsustainable.
Although the budget documents note the potential for gains from SpaceX, Anthropic and OpenAI, each of which have a significant labor force in the state, the government refrained from estimating the impact. The LAO told MarketWatch that it had not yet estimated the potential benefits from SpaceX's plans.
Hoene told MarketWatch that higher tax revenue from wealthy residents has become "pivotal" as wealth becomes more highly concentrated, an issue that has been at the heart of public-policy debate in California as the state considers a so-called billionaire tax. More revenue allows states like California to invest in programs designed to help struggling residents make ends meet, Hoene said.
"That revenue from the IPOs, from the tech sector more generally, does end up being vital to the state," Hoene said. "We oftentimes hear people say, 'Well, they end up paying a disproportionate share of the state's taxes,' which is true, but they also have a disproportionate share of the state's wealth."
See more: California is one step closer to America's first billionaire tax. It shows how deep the divide between red and blue state taxes is now.
Hotel California
SpaceX still operates a large facility in Hawthorne, Calif.
In 2024, SpaceX moved its headquarters from California to Texas, as Musk expressed outrage over a California civil-rights law. That followed Tesla investors' approval for that company to also move its headquarters from California to Texas, which stemmed from Musk's feud with California officials over COVID-era restrictions in 2020. Texas also offers benefits like lower taxes, since it has no state income tax for employees or companies.
Musk, who lived in California for decades, himself moved out of the state in late 2020, likening it to a sports team with a long winning streak that had grown "complacent" and "entitled."
He hasn't let up on the criticism since, often bashing the state and Newsom on social media. Despite that, Musk is still important to the state, and vice versa.
Musk founded SpaceX in El Segundo, Calif., eventually moving its headquarters and rocket factory to Hawthorne, in Los Angeles County. SpaceX still designs and builds its rockets and satellites in Hawthorne, which it touts as "one of the few" places in the world where an entire launch vehicle or spacecraft is produced under one roof.
Read more: Wall Street is set to reap a fee bonanza that could reach $1 billion from the SpaceX IPO
Tesla's factory in Fremont, Calif., which it acquired from Toyota in 2010, currently makes Model Y and Model 3 electric vehicles and is expected to produce Optimus humanoid robots.
SpaceX employed 7,661 people in Hawthorne as of June 30, 2025, according to the city's most recent financial report, which makes the company the largest single employer in Hawthorne. And as of Monday, SpaceX also has more than 500 posted job listings across California.
Overall, the company has roughly 1,700 available positions listed on its website, and it employed around 23,000 people as of February, according to Chief Operating Officer Gwynne Shotwell. While it's unclear exactly how many people SpaceX employs across the U.S., that approximation from Shotwell implies that about a third of the company's staff is based in Hawthorne.
SpaceX employees have been granted equity over the years, which will be easier to sell in the months after the company's IPO. Those stock sales will generate capital gains, which California treats as ordinary income and taxes at rates as high as 13.3%.
SpaceX has been credited with helping revitalize Hawthorne, drawing in new restaurants, hotels and an arts complex, as local newspaper the Daily Breeze reported in 2017. Rocket launches by SpaceX and others at Vandenberg Space Force Base, located some 160 miles up the California coast, are also a popular attraction.
"Those kinds of things have been popping up all over the place to support the growing economy in Hawthorne," Epsilon3 CEO Laura Crabtree, whose startup is based in El Segundo, less than an hour from Hawthorne, told MarketWatch of the new businesses created in the city.
Crabtree workied at SpaceX for over a decade and during that period, she saw the city "being built up around" the commerce that SpaceX brought. The city has always been good to SpaceX, she added, which resulted in a mutually beneficial relationship.
See more: The 'SpaceX mafia' is here. Elon Musk's big IPO could launch a constellation of new companies.
Epsilon3 isn't the only startup led by ex-SpaceXers in California. Of the 154 startups founded by SpaceX alumni who worked at the company for over a year, 94 are based in California, according to Alumnifounders, which tracks companies created by former SpaceX workers.
Astrolab, a space startup founded by ex-SpaceXers and NASA employees, is working with SpaceX to send its commercial rover to the moon. Its headquarters in Hawthorne is within walking distance of SpaceX's facility at 1 Rocket Road.
"As the home of SpaceX, the City of Hawthorne is very happy for SpaceX, its workers and everyone else who will benefit from this initial IPO, which also includes our city's residents," Hawthorne Mayor Alex Vargas told the Daily Breeze in April. His office did not respond to MarketWatch's request for comment.
Before Facebook, now Meta Platforms (META), launched its IPO in 2012, the California LAO estimated that employees would pay some $2 billion in taxes related to stock transactions across the state's 2012 and 2013 fiscal years. However, the state revised its forecast after Facebook's stock price fell much more than expected in the weeks after its IPO, a not uncommon occurrence.
Don't miss: What to know about investing in SpaceX - or any company - before it goes public
-William Gavin
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May 19, 2026 14:01 ET (18:01 GMT)
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