SpaceX IPO Sparks Wealth Planning Frenzy for Employees

(Bloomberg) — If SpaceX’s IPO goes off as planned, it’ll be a pivotal moment for many of the company’s thousands of employees, who’ll finally be able to sell shares into the public market.

That prospect has created a groundswell of business for wealth advisers who specialize in dealing with the sort of complex equity compensation favored by tech startups, as well as the massive tax bills that are likely to follow.

“We’ve been working 10-, 12-hour days, even on weekends,” said Frank Alvarez, a consultant with San Diego-based Tidemark Financial Partners, who has about two-dozen SpaceX employees as clients. “The tension, and the energy, is being felt throughout the office. It’s prime time right now.”

Some of that tension is also being felt by their clients, advisers say. Along with the anticipation of a life-changing windfall, the initial public offering is eliciting more complicated emotions, as well, ranging from apprehension to confusion.

“I wouldn’t say it’s quite like being a lottery winner, but with sudden wealth, with newfound wealth, it’s a different mindset,” said Angela Dorsey, a financial planner based near SpaceX’s Hawthorne, California, offices who works with multiple clients from the company. “They are excited about it, but once the initial excitement passes, fear seeps in.”

Some employees in their 20s and 30s are having a hard time wrapping their head around the need to set up exotic-sounding estate-planning tools they didn’t think they’d have to worry about for another few decades, wealth managers say.

“You’re talking to this 37-year-old about GRATs, about SLATs, about irrevocable living trusts, and they’re like, ‘I’ve never heard of this in my life,” said Alvarez, who averages a dozen or so meetings a week with SpaceX employees. “They say, ‘I have a 1-year-old kid at home. What are you talking about?’”

‘Different Beast’

SpaceX has more than 22,000 full-time employees globally, some of whom have worked there since its founding 24 years ago, and others who joined after Elon Musk merged the rocket company with his xAI artificial intelligence and social media business in February. SpaceX is gearing up to go public as early as next week, with Musk targeting a valuation of nearly $1.8 trillion.

The company’s S-1 filing last month said it places a “heavy emphasis on equity compensation,” but didn’t specify how many employees are included in the program. SpaceX in 2024 set aside more than 365 million shares for employees, directors and consultants as part of their future pay.

The company will reserve up to 5% of stock in the IPO for certain employees, as well as friends and family of its executive officers, SpaceX said Monday in an amended filing. It plans to sell shares at $135 apiece in the public offering, the firm said Wednesday.

SpaceX didn’t respond to a request for comment.

For decades, there’s been a rich ecosystem of financial planners — many on the West Coast — familiar with the intricacies of how tech companies structure equity compensation for their employees. But even compared with other companies such as Nvidia Corp. or Tesla Inc. whose shares recently soared, the speed of SpaceX’s growth — and the relative youth of its employee base — make it a whole different beast, they say.

“You can imagine a lot of people between the ages of 27 and 35, holding between $5 million and $15 million in equity, and the assets that they have outside of that are $20,000 in a Robinhood account,” Alvarez said. “They’re going from ‘Hey, I just graduated college and this is my first job’ into becoming this wealthy individual.”

Lockup Headaches

Additionally, the lead time that employees have had to plan for selling their shares has been short. For years, the rocket company’s senior leadership insisted that an IPO was a distant possibility, with President Gwynne Shotwell saying in a 2018 interview that the company wouldn’t go public until it was regularly flying to Mars.

While employees were able to sell shares and drum up liquidity through regular tender offers, a public offering always seemed far-off, meaning many employees who weren’t already approaching retirement age have had to scramble to get their finances in order over the past few months.

“Prior to the announcement of the IPO, I was working with more senior employees” who “knew retirement was on their horizon,” Dorsey said. “Now, the younger people, they’re really not prepared.”

SpaceX’s IPO creates more questions for its employees than a typical offering. The biggest for many is if and when to sell their shares. The firm’s prospectus lists a series of events that could see portions of employees’ shares become eligible for public sale ahead of the standard, 180-day lockup period. These include a series of criteria tied to SpaceX’s first two quarterly earnings releases.

“I personally don’t think I’ve ever seen a lockup this complex,” said Kris Barney, a former investment banker and tech industry worker who started a wealth-management firm in Charlotte, North Carolina, specializing in dealing with equity compensation.

For some, selling any shares at all takes convincing. Advisers say that many clients are hesitant to diversify into other assets after seeing SpaceX’s soaring valuation boost their net worth many times over the past few years.

“They believe their stock could still 10x from this point,” Alvarez said. “From a financial planning standpoint, you never bet against Elon, but still you have those conversations of saying ‘I get it, I’m with you, however, history is not on our side when it comes to IPOs.’”

Generational Wealth

While SpaceX employees in California are surrounded by a number of local financial planners well-versed in dealing with niche equity compensation questions, those working out of the company’s headquarters in Starbase, Texas, face different challenges.

It’s not just engineers and operations staff getting compensated in stock, said Michael Limas, a financial planner based in the nearby border town of Brownsville, but also non-technical employees — such as cooks and welders — receiving equity.

“SpaceX has been very friendly with options at various levels, from top to bottom,” Limas said. “It’s something that’s unique to this area.”

For years, SpaceX employees have had a vague sense of the private value of their equity. But now, with an IPO on the verge of being realized, confronting that reality “is bringing a lot more anxiousness into things,” Alvarez said.

Much of the stress comes from the sense that this could be their one shot to build generational wealth for themselves and their families, and it’s vital to play their cards right, wealth managers said.

“There’s a concern about having regrets, and not navigating it in the best way,” Barney said. “With life-changing wealth, you want to be confident in the decisions that you make.”

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