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A report from TechCrunch has found that SpaceX includes some strange rules in its stock award agreements which many of its employees are not aware of.
According to insider information and leaked internal documents, provisions in typical contracts allow SpaceX - the spacecraft manufacturer and operator founded by Elon Musk - to ban employees from selling stock in tender offers if it rules they have committed an “an act of dishonesty against the company” or have violated written company policies.
Tender offers are opportunities for employees to monetize their company equity immediately, rather than having to wait for the company to go public or get acquired. This includes company share buybacks where the organization repurchases shares from shareholders such as employees.
At SpaceX, buyback events have occurred around twice a year, giving employees the chance to sell their vested shares if they wish to access the cash value of the stock immediately rather than holding out for the future – but not if they are deemed by SpaceX to have misbehaved.
A former employee, speaking to TechCrunch, says employees typically aren’t aware of this condition when they sign up to SpaceX’s equity compensation management platform.
Per documentation viewed by TechCrunch, another provision permits SpaceX to purchase back vested shares within six months after an employee leaves the company for any reason.
Moreover, if an employee was fired “for cause,” the stock award agreement states SpaceX can repurchase the employee’s stock for a price of $0 per share.
Former employees have criticized the provisions for placing restrictions on the financial freedoms of SpaceX workers, saying they “keep everyone under their control, even if they have left the company.”
They add that the compensation policies are frustrating for employees who will not see any immediate value from their shares but must foot the tax bill all the same.
“Since there is no urgency by SpaceX to go public, being banned from tender offers effectively zeros out your shares, at least for a long time. Even though you paid thousands to cover the taxes,” the former employee says.
SpaceX has also made the headlines for non-employer-friendly practices recently, having been accused of discrimination, retaliation, and harassment against a female employee who says she was serially sexually abused by her former manager.
Many SpaceX employees, as is typical in US tech companies, offer compensation packages including stock options. Such equity agreements are often compelling reasons for attracting top talent who hope to earn million-dollar paydays.
Employees at companies like Snap Inc., Klarna, and many other tech start-ups have all become millionaires as their employers went public with billion-dollar valuations.
Stock can only be sold in private companies – like SpaceX – with the company’s permission, meaning employees who wish to convert their equity into cash must wait for the company to go public, or hope for opportunities such as tender offers.
Most start-ups do have some type of terms and conditions for employee equity agreements, so SpaceX isn’t alone in having restrictions, but according to Mary Russell, an attorney and stock options expert, the SpaceX provisions are far from standard.
“It sounds unusual to have [a] cause type exclusion provision in a tender offer agreement,” she tells TechCrunch.
SpaceX has not publicly commented on the matter.
