Elon Musk’s aerospace company, SpaceX, permits Chinese investors to acquire stakes in the organization, as long as the transactions are conducted through offshore secrecy hubs such as the Cayman Islands, according to unreported court records.
This operational detail about SpaceX’s investment strategy emerged during an inconspicuous corporate dispute in Delaware, which required testimonies from both SpaceX’s Chief Financial Officer (CFO) and a major investor, Iqbaljit Kahlon.
In December, Kahlon stated that while SpaceX usually avoids Chinese investors due to its status as a defense contractor, it is considered “acceptable” for Chinese investments to occur via offshore entities. Kahlon elaborated that these investments typically utilize structures set up in places like the British Virgin Islands (BVI), Cayman Islands, or Hong Kong, to maintain investor anonymity.
Specialists have described SpaceX’s investment approach as atypical, expressing concerns over the deliberate concealment of foreign ownership interests by a defense contractor. Kahlon, closely linked with SpaceX leadership, allegedly owns billions in SpaceX stock and facilitates investments by procuring SpaceX shares for others, often routing capital from China through the Caribbean as noted in court documents.
The legal case discusses a failed 2021 deal where SpaceX disallowed a planned $50 million stock purchase by a Chinese company after media reports surfaced. SpaceX executives, according to their CFO, were concerned about the media publicity affecting their government contracts, which provide substantial revenue for sensitive projects like classified satellite networks.
Though federal regulations allow regulators wide authority over foreign investments, companies need only report Chinese involvement in specific situations, with no fixed regulations on what extent triggers national security concerns. However, U.S. officials often aggregate Chinese investments for comprehensive assessment due to fears of foreign leverage or access to sensitive information.
The newly available materials do not accuse SpaceX of unlawful conduct nor do they assert Chinese governmental direction in the investments. SpaceX did not comment, and Kahlon refrained from explaining the company’s strategic decisions.
It is not unusual for international investors to utilize Cayman Islands vehicles for U.S. investments to minimize tax obligations. However, experts note that it is uncommon for a U.S. company to insist on such mechanisms, suggesting a possible intent to obscure Chinese ownership within SpaceX.
ProPublica consulted multiple legal and finance experts about SpaceX’s testimony, which overwhelmingly suggested unfamiliarity with such a U.S. corporate policy. A minority speculated it might indicate an effort to mask foreign ownership. UCLA law professor Andrew Verstein described SpaceX’s strategies as potentially problematic, emphasizing the need for defense contractors to maintain transparency regarding funds from foreign competitors.
These findings contribute to wider queries about Musk’s engagements with China—an issue of heightened concern as Musk has regularly met with Chinese Communist Party officials, linked to his broader business interests, notably in Tesla’s large market and manufacturing presence in China.
Recent revelations also document Musk’s proximity to U.S.-China strategic discussions and issues linked to ownership secrecy, with continued inquiries about the actual extent of Chinese investments in SpaceX, amidst broader U.S. scrutiny over Chinese capital influence in sensitive sectors.
Despite these complexities, SpaceX’s CFO has stated that there is no formal policy on investments from adversarial nations, though there exists a prevalent preference against such financial links, due to competitive risks associated with defense contracts.
In the landmark Delaware case, Kahlon—an enduring SpaceX insider—was recognized for facilitating Chinese investments through intermediary entities, maintaining consistent interactions with SpaceX executives, and ensuring the admittance of firm-approved investors. This situation underscores ongoing debates around foreign capital’s impact in major U.S. enterprises, particularly within Musk’s expansive business network.