Who Benefits from the SEC’s Proposed Filer Reforms? SpaceX Case Study
You know what’s shocking?
SpaceX’s initial public offering (IPO) was the largest in history, raising $75 billion by selling 555.55 million shares at $135 each, making Elon Musk the world’s first trillionaire. But how will the SEC’s proposed filer reforms impact large IPO’s such as SpaceX?
Did you know that, at 4% interest per annum (the current 1-year U.S. Treasury yield), the interest alone on that amount of money is $40 billion per year (or nearly $110 million per day)!
Kudos to him. He’s obviously playing multidimensional chess in the Matrix while the rest of us are playing checkers in a sandbox!
Musk owns “only” 40% of the company, but because of SpaceX’s dual-class share structure, he controls over 80% of the voting rights. Furthermore, this dual-class provision in SpaceX’s formation documents doesn’t have a sunset provision.
SpaceX is currently the 7th largest company based on a market capitalization of just over $2 trillion. It’s larger than Meta Platforms, Walmart, and JPMorgan Chase. In fact, it is larger than Coca-Cola, Procter & Gamble, Exxon Mobil, General Electric, and Home Depot…combined!
Here’s where things become interesting.
You know what these companies have that SpaceX does not? Profits. SpaceX posted a net loss of $4.9 billion in 2025 under U.S. GAAP, although it disclosed Adjusted EBITDA of $6.6 billion. Aren’t non-GAAP financial measures fun? Who cares about those “silly” GAAP rules? Am I right?
Another thing that these companies have that SpaceX does not is an independent board of directors. That’s because SpaceX is considered a “controlled company,” where an individual, group, or another organization holds over 50% of the voting power.
As a controlled company, SpaceX enjoys certain exemptions from certain corporate governance requirements that other companies must follow such as the requirement to have majority-independent board of directors or independent compensation and nominating committees.
This effectively gives Musk control over the company’s strategic direction, board composition, and shareholder votes – with no built-in expiration.
What if, like me, you wouldn’t touch such an investment with a ten-foot pole? Well, you might already own it. That’s because FTSE Russell already changed its rules so that SpaceX is eligible for inclusion in both the Russell U.S. Equity Indexes and the FTSE Global Equity Index Series. I’m glad that S&P Global didn’t relax its standards to include SpaceX in the benchmark S&P 500 Index, or every investor in the world would’ve owned it!
But here’s the part that should concern investors.
Another thing these companies have that SpaceX doesn’t is an external auditor attestation of their internal controls over financial reporting (ICFR). That’s because current rules within Section 404 of the Sarbanes-Oxley Act do not require companies that go public to provide external auditor attestation of ICFR in their first registration statement.
In fact, under current rules, SpaceX does not have to provide an external auditor attestation of ICFR until their SECOND Annual Report filed on Form 10-K. That would be for the year ended December 31, 2027, or 18 months from now.
However, it gets better (for Musk, not for investors)!
Under proposed rules, the SEC would only have two primary filer categories: large, accelerated filers (LAFs) and non-accelerated filers (NAFs). While there are other provisions in this proposal worth talking about, the one I want to focus on relates to external auditor attestation of ICFR. NAFs (those companies with public float under $2 billion under the proposal) would not be required to obtain an external auditor attestation of ICFR.
But here’s the remarkable part. A company filing an IPO would also enter as a NAF – regardless of size – and would retain that status for a minimum of 60 months!
Under today’s rules, SpaceX investors already must wait approximately 18 months after the IPO to receive an auditor’s opinion on ICFR. Under the proposal, the waiting period for an ICFR audit could stretch to five years, regardless of company size.
For the seventh-largest company, run by a founder who exercises extraordinary voting control through a perpetual dual-class structure because it’s a controlled company, five years is a LONG TIME before PwC, their external auditors, would be required to provide their auditor attestation on ICFR. What could go wrong?
While an ICFR audit doesn’t guarantee the financial statements are perfect, it at least gives investors comfort from an external, independent auditor that the company’s financial reporting processes are designed and operating effectively.
In closing I have a humble request…
The SEC’s mission has three pillars:
- Protecting investors
- Maintaining fair, orderly, and efficient markets
- Facilitating capital formation
It has been made abundantly clear since Chairman Atkins took the helm that the SEC is laser-focused on pillar #3.
When Congress created the SEC in 1934, I doubt the phrase “facilitating capital formation” contemplated helping to create trillionaires. In fact, when defining that pillar on their website, the SEC states “Access to capital is particularly critical for small businesses, which create approximately two-thirds of all new jobs in the U.S. economy.” SpaceX isn’t a “small business.” Neither is OpenAI or Anthropic, both of which will also benefit from the proposed rules.
We’ve seen before what can happen when governance and internal controls are viewed as secondary concerns. Remember the “smartest guys in the room?” Enron is one of the reasons Sarbanes-Oxley was created in the first place!
So, I ask:
Who are these proposed rules really benefiting?”
I humbly ask Chair Atkins and the two other SEC commissioners (that’s a topic for another post) to not forget about pillar #1 and remember that their mission begins with protecting investors. This includes the “little people,” like me, playing checkers in the sandbox! You know the people worth 99.9995% less than the guy playing by himself in the Matrix!
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Disclaimer
This post is for informational purposes only and should not be relied upon as official accounting guidance. While we’ve ensured accuracy as of the publishing date, standard evolve. Please consult a professional for specific advice.
