\n<\/p>\n
ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they\u2019re published.<\/p>\n
Elon Musk\u2019s SpaceX has taken money directly from Chinese investors, according to previously sealed testimony, raising new questions about foreign ownership interests in one of the United States\u2019 most important military contractors.<\/p>\n
The recent testimony, coming from a SpaceX insider during a court case, marks the first time direct Chinese investment in the privately held company has been disclosed. While there is no prohibition on Chinese ownership in U.S. military contractors, such investment is heavily regulated and the issue is treated by the U.S. government as a significant national security concern.<\/p>\n
\u201cThey obviously have Chinese investors to be honest,\u201d Iqbaljit Kahlon, a major SpaceX investor, said in a deposition last year, adding that some are \u201cdirectly on the cap table.\u201d \u201cCap table\u201d refers to the company\u2019s capitalization table, which lists its shareholders.<\/p>\n
Kahlon\u2019s testimony does not reveal the scope of Chinese investment in SpaceX or the identities of the investors. Kahlon has long been close with the company\u2019s leadership and runs his own firm that acts as a middleman for wealthy investors looking to buy shares of SpaceX.<\/p>\n
SpaceX keeps its full ownership structure secret. It was previously reported that some Chinese investors had bought indirect stakes in SpaceX, investing in middleman funds that in turn owned shares in the rocket company. The new testimony describes direct investments that suggest a closer relationship with SpaceX.<\/p>\n
SpaceX has thrived as it snaps up sensitive U.S. government contracts, from building spy satellites for the Pentagon to launching spacecraft for NASA. U.S. embassies and the White House have connected to the company\u2019s Starlink internet service too. Musk\u2019s roughly 42% stake in the company is worth an estimated $168 billion. If he owned nothing else, he\u2019d be one of the 10 richest people in the world.<\/p>\n
National security law experts said federal officials would likely be deeply interested in understanding the direct Chinese investment in SpaceX. Whether there was cause for concern would depend on the details, they said, but the U.S. government has asserted that China has a systematic strategy of using investments in sensitive industries to conduct espionage.<\/p>\n
If the investors got access to nonpublic information about the company \u2014 say, details on its contracts or supply chain \u2014 it could be useful to Chinese intelligence, said Sarah Bauerle Danzman, an Indiana University professor who has worked for the State Department scrutinizing foreign investments. That \u201cwould create huge risks that, if realized, would have huge consequences for national security,\u201d she said.<\/p>\n
SpaceX did not respond to questions for this story. Kahlon declined to comment.<\/p>\n
The new court records come from litigation in Delaware between Kahlon and another investor. The testimony was sealed until ProPublica, with the assistance of lawyers at the Reporters Committee for Freedom of the Press and the law firm Shaw Keller, moved in the spring to make it public. SpaceX fought the effort, but a judge ruled that some of the records must be released. Kahlon\u2019s testimony was publicly filed this week.<\/p>\n
Buying shares in SpaceX is much more difficult than buying a piece of a publicly traded company like Tesla or Microsoft. SpaceX has control over who can buy stakes in it, and the company\u2019s investors fall into different categories. The most rarefied group is the direct investors, who actually own SpaceX shares. This group includes funds led by Kahlon, Peter Thiel and a handful of other venture capitalists with personal ties to Musk. Then there are the indirect investors, who effectively buy stakes in SpaceX through a middleman like Kahlon. (The indirect investors are actually buying into a fund run by the middleman, typically paying a hefty fee.) All previously known Chinese investors in SpaceX fell into the latter category.<\/p>\n
This year, ProPublica reported on an unusual feature of SpaceX\u2019s approach to investment from China. According to testimony from the Delaware case, the company allows Chinese investors to buy stakes in SpaceX so long as the money is routed through the Cayman Islands or other offshore secrecy hubs. Companies only have to proactively report Chinese investments to the government in limited circumstances, and there aren\u2019t hard and fast rules for how much is too much.<\/p>\n
After ProPublica\u2019s report, House Democrats sent a letter to Defense Secretary Pete Hegseth raising alarms about the company\u2019s \u201cpotential obfuscation.\u201d \u201cIn light of the extreme sensitivity of SpaceX\u2019s work for DoD and NASA, this lack of transparency raises serious questions,\u201d they wrote. It\u2019s unclear if any action was taken in response.<\/p>\n
Kahlon has turned his access to SpaceX stock into a lucrative business. His investor list reads like an atlas of the world. The investors\u2019 names are redacted in the recently unsealed document, but their addresses span from Chile to Malaysia. One is in Russia. At least two are in mainland China. One is in Qatar. (In one email to SpaceX\u2019s chief financial officer, Kahlon said a Los Angeles-based fund had money from the Qatari royal family and was already invested in SpaceX.)<\/p>\n
\u201cYou made a big fortune,\u201d a China-based financier wrote to Kahlon four years ago. \u201cLol something like that. SpaceX has been the gift that keeps on giving,\u201d Kahlon responded. \u201cAll thanks to you.\u201d<\/p>\n
Kahlon first met with SpaceX when it was a fledgling startup, according to court records. SpaceX\u2019s CFO, Bret Johnsen, who\u2019s been there for 14 years, testified that Kahlon \u201chas been with the company in one form or fashion longer than I have.\u201d Johnsen also testified that SpaceX has no formal policy about accepting investments from countries deemed adversaries by the U.S. government. But he said he asks fund managers to \u201cstay away from Russian, Chinese, Iranian, North Korean ownership interest\u201d because that could make it \u201cmore challenging to win government contracts.\u201d<\/p>\n
\n Arduous and Unequal: The Fight to Get FEMA Housing Assistance After Helene<\/strong>\n <\/p>\n There are indications that by 2021, Kahlon was wary of raising funds from China. The U.S. government had grown increasingly concerned about Chinese investments in tech companies, and that June, Kahlon told an associate he was \u201cbeing picky\u201d with who he\u2019d let buy into a new SpaceX opportunity. \u201cOnly people I want to have a relationship with long term. No one from mainland China,\u201d Kahlon said.<\/p>\n But as he raced to assemble a pool of investors, those concerns appeared to fade away. By November 2021, Kahlon was personally raising money from China to buy SpaceX stakes. He told a Shanghai-based company that if it invested with him, it would get quarterly updates on SpaceX\u2019s business development, \u201cvisits to SpaceX, and the opportunities to interview with Space X\u2019s CFO,\u201d court records show.<\/p>\n The Shanghai company ultimately sent Kahlon $50 million to invest in Musk\u2019s business, according to court records. SpaceX had the deal canceled after the plan became public.<\/p>\n Do you have any information we should know about Elon Musk\u2019s businesses? Justin Elliott can be reached by email at justin@propublica.org and by Signal or WhatsApp at 774-826-6240. Josh Kaplan can be reached by email at joshua.kaplan@propublica.org and by Signal or WhatsApp at 734-834-9383.<\/p>\n Alex Mierjeski contributed research.<\/p>\n","protected":false},"excerpt":{"rendered":" ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they\u2019re published. Elon Musk\u2019s SpaceX has taken money directly from Chinese investors, according to previously sealed testimony, raising new questions about foreign ownership interests in one of the United States\u2019 most important military contractors. The<\/p>\n","protected":false},"author":1,"featured_media":25405,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55],"tags":[4261,2071,2694,3106,2062,247,73],"class_list":{"0":"post-25404","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-social-issues","8":"tag-chinese","9":"tag-company","10":"tag-insider","11":"tag-investors","12":"tag-money","13":"tag-propublica","14":"tag-spacex"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/25404","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=25404"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/25404\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/25405"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25404"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25404"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25404"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}