Major American union writes to the SEC: SpaceX's $2 trillion IPO defies financial logic

How AI · New Passive Investment Rules Could Affect Retirement Funds?

One of the largest public-sector unions in the United States has issued a warning to securities regulators, targeting SpaceX’s largest-ever IPO plan. It claims the valuation “defies financial logic” and has urged the SEC to conduct a rigorous review of the relevant filing documents.

On Wednesday, the American Federation of Teachers (AFT) sent a letter to the U.S. Securities and Exchange Commission (SEC), asking the regulator to conduct an in-depth review of SpaceX’s IPO filing materials. AFT president Randi Weingarten said in a statement, “This is not just a regular IPO—this will be the largest listing in U.S. history, and it is being rushed to the market with a valuation that defies financial logic.” Neither SpaceX nor the SEC has commented on the matter.

The core controversy is that SpaceX is seeking to raise about $75 billion at a valuation of up to $2 trillion, but there is a clear mismatch between that valuation and its current revenue scale. Analysts note that this valuation relies more on CEO Elon Musk’s vision for the company’s future than on existing financial fundamentals. If the IPO successfully goes through, it would become the largest initial public offering in history.

Union Makes Its Move for the First Time, Urging the SEC to Tighten Its Scrutiny

The AFT’s letter to the SEC is the first time the union has proactively pressured regulators on the eve of an IPO, representing the interests of about 1.8 million education, healthcare, and public-sector workers.

In the letter, Weingarten raised concerns across multiple areas, including SpaceX’s management practices and accounting methods. The AFT also asks the SEC and its chair, Paul Atkins, to focus on reviewing the issue of “forced investment”—a risk that stems from recent proposed rule changes from multiple index providers.

The union cites certain precedents to support the legitimacy of its action. In 2000, the AFL-CIO held an “alternative roadshow” for the IPO of China National Petroleum Corporation in the U.S., which deterred some potential investors and subsequently drove reforms to foreign entity information disclosure rules.

Index Rules Loosen, “Passive Investment” Becomes the Focus of Dispute

Another key concern for the AFT is that major index providers are accelerating their pace of opening up to large private companies such as SpaceX, which could result in ordinary retirement savers passively holding shares of SpaceX without realizing it.

As mentioned by Wall Street China earlier this March, SpaceX has considered inclusion in the Nasdaq 100 index as a prerequisite for listing on Nasdaq, and the IPO may begin as early as June this year. Nasdaq has taken the lead in approving related rule changes this year, allowing large newly listed companies to be included in the Nasdaq 100 index just 15 days after listing, rather than previously requiring several months. S&P Dow Jones Indices and subsidiaries of the London Stock Exchange Group are also considering introducing similar rules.

Reena Aggarwal, a finance professor at Georgetown University, said:

“Passive investing already accounts for a very large share of the market. If large IPOs like SpaceX are not included, many investors will miss out on the related gains.”

The AFT takes the opposite view, arguing that Nasdaq’s rule changes will effectively “force” its members to invest in SpaceX at a “proportion that does not match its actual market value.” The size of retirement and benefit fund assets in which the union’s members participate is about $3 trillion, and some members also hold market investments personally.

Valuation Logic in Question: SpaceX’s Ambitious Goals, but Risks Remain Unclear

SpaceX’s valuation predicament stems from the huge gap between its ambitious long-term goals and its revenue scale at this stage. According to reports, the company’s current revenue is far below the level implied by a $2 trillion valuation. Its pursuit of multiple objectives—including the vision of interstellar migration—requires years of sustained investment, and whether it will ultimately be achieved remains uncertain.

The AFT is concerned that once SpaceX goes public, its members will indirectly assume the company’s various challenges and risks through market investments held in their retirement accounts.

Weingarten’s wording in the statement is forceful:

“The committee must demand ironclad information disclosure, independent oversight mechanisms, and safeguards against forced investment—otherwise, it is betting workers’ lifetime savings on an organization that operates more like Musk’s family enterprise than a transparent publicly listed company.”

Not the First Time They’ve Clashed: Ongoing Friction Between the AFT and Musk

This letter to the SEC is not the first time the AFT has confronted Musk. Last year, the union warned financial institutions such as Fidelity and BlackRock about Tesla’s declining stock price, saying that members’ holdings of Tesla shares could put their pensions “at risk.” It also joined forces with others to pressure investors to reject Musk’s executive compensation plan.

In October last year, Weingarten publicly criticized: “Tesla’s board not only failed to uphold basic governance standards, but instead gave a green light to a CEO who spends the entire year embroiled in immature political struggles and has little time to create value for shareholders—approving a $1 trillion compensation package.”