SpaceX Employees Seek Favorable Severance Packages Amidst Upcoming Corporate Restructuring

SpaceX Employees Unite to Negotiate Better Financial Terms Ahead of IPO

More than 1,000 current and former SpaceX employees have joined forces to negotiate with wealth management firms for more favorable pricing and access to sophisticated tax-saving financial products ahead of the company's highly anticipated initial public offering (IPO). The group, which represents at least $2 billion in wealth, is leveraging their collective power to secure significantly lower fees for financial advice, aiming to pay less than 0.5% on all assets under management, compared to the traditional 1% fee.

The effort has been organized in a private Slack room and led by Aisha Ayoub, a former engineer at Elon Musk's rocket, satellite, and artificial intelligence company. The group has considered over 20 financial advisers and private banks, including big banks like Morgan Stanley and registered investment advisers such as Creative Planning and Corient. According to a May document summarizing the effort, the group did not consider broker-affiliated advisers due to their complex cost structures or so-called robo-advisers because they are less suited for households with complex liquidity, tax, and concentrated position planning needs.

The SpaceX group's push for collective bargaining has the potential to create a new playbook for startup employees trying to manage the wealth unlocked by blockbuster IPOs. As OpenAI and Anthropic prepare to go public, a larger cohort of employees is about to experience significant windfalls. The group's goal is to access complex strategies like equity-based lending and direct indexing, which are typically used by sophisticated investors, such as hedge funds and family offices, to defer capital gain taxes on their rapidly growing equity portfolios.

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The SpaceX staffers are seeking financial instruments that could let them tap the value of their shares without the tax hit that would come from selling them. One such product is a variable prepaid forward contract (VPFC), a loan-like structure that allows a shareholder to borrow against equity holdings and get cash upfront. They are also discussing strategies to diversify their portfolios, given their heavy exposure to the value of SpaceX. Direct indexing would allow them to own individual stocks inside an index rather than a bundled ETF, making it possible to avoid further exposure to SpaceX while also harvesting tax losses stock-by-stock.

Wealth managers, such as Dominic Corabi, co-founder of Wedmont Private Capital, believe that these types of negotiations will become more common as more startup employees come into sudden wealth. "Banding together into a cohort and negotiating from a position of strength is going to be, without question, the way to go," said Corabi. "They're going to get better terms, better pricing from custodians and product providers."

The talks with wealth firms come at the same time that SpaceX executives are said to be pushing to cut the fees charged by the banks handling its IPO. The company is planning to go public as soon as this month in what is expected to be the largest IPO ever, boosted by Musk's ambition to dominate the market for AI computing power and satellite communications, and ultimately settle other planets. It is looking to raise as much as $75 billion in an offering that could give the company a valuation of at least $1.8 trillion.

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