According to previously unreported court records, SpaceX, an aerospace company led by Elon Musk, permits Chinese investors to acquire stakes in the company if the funds are funneled through offshore secrecy jurisdictions such as the Cayman Islands. Details of this arrangement surfaced during an obscure corporate legal dispute in Delaware, where SpaceX’s Chief Financial Officer and a significant investor, Iqbaljit Kahlon, provided testimony.
In December, Kahlon disclosed that SpaceX generally avoids Chinese investors due to its status as a defense contractor. However, an exception exists for investment through offshore entities. Kahlon explained that these investors often use intermediaries or create entities in places like the British Virgin Islands, the Cayman Islands, or Hong Kong to invest in SpaceX. These offshore mechanisms commonly serve to keep investors anonymous.
Experts have described SpaceX’s strategy as unconventional and expressed concerns about a defense contractor potentially taking steps to obscure foreign ownership interests. Kahlon, who maintains a close association with SpaceX leadership and holds substantial stock in the company, has channeled funds from China through Caribbean pathways to invest in SpaceX on several occasions, as indicated by court documents.
The corporate dispute originated from a terminated 2021 transaction after SpaceX executives became upset with reports of a Chinese firm’s plan to purchase $50 million worth of the company’s stock. SpaceX ultimately canceled the purchase. The company’s CFO testified that such media coverage was unhelpful, particularly for its government contractor role, with the U.S. government paying SpaceX billions for sensitive projects, including a classified spy satellite network.
U.S. federal law grants regulators extensive authority to oversee foreign investments in technology and defense sectors. While companies are required to report Chinese investments under limited circumstances, the rules concerning investment scale are not rigid. The government reserves the ability to investigate and invalidate transactions deemed a national security threat, unless they involve purely passive, minor investments. However, regulators typically request companies aggregate Chinese investments to assess their collective impact.
The U.S. government alleges that China systematically utilizes minority investments to gain leverage over sensitive industry companies and to access cutting-edge technology information. U.S. authorities reportedly view even private Chinese investors as potential extensions of the Chinese government.
SpaceX did not respond to detailed inquiries from ProPublica, and Kahlon declined to comment on SpaceX’s investment strategies. It is not uncommon for foreign investors to use vehicles such as those in the Cayman Islands to purchase U.S. stocks, often for tax efficiency. Nonetheless, experts noted it is unusual for a U.S. company to prefer such arrangements.
ProPublica consulted 13 experts on national security and Chinese finance about SpaceX’s practices, 12 of whom had never encountered such a requirement by a U.S. company and presumed its purpose was likely to obfuscate Chinese ownership. The 13th expert noted some companies employ this practice to mask international investments.
The matter adds to the scrutiny over Musk’s extensive ties with China, a topic that has gained urgency since his involvement with the Trump administration. Musk has met with Chinese Communist Party officials about his business ventures, which include manufacturing a significant portion of Tesla vehicles in China.
Recent events, including a canceled briefing on potential U.S.-China conflict scenarios, have highlighted the complex relationship between Musk’s enterprises and Chinese interests. The court records reveal a deliberate effort within SpaceX to maintain secrecy related to Chinese investors, utilizing independent agents to sell shares to Chinese investors discreetly.
The court proceedings do not definitively reveal the extent of Chinese investment in SpaceX. However, they indicate small amounts of SpaceX stock have been acquired by Chinese investors using offshore structures. The exact financial scale of these investments is undisclosed, though publicly known figures suggest they total under $100 million.
The records raise concerns that SpaceX might have more substantial Chinese ties than publicly acknowledged, potentially concealing these from U.S. regulators. Alternatively, the company might be aiming to avoid criticism from media or Congress regarding legitimate investments.
Chinese investments in Silicon Valley have become contentious amid escalating geopolitical tensions. Corporate lawyers warn that requiring offshore vehicles might imply concealment intentions to the government.
Bret Johnsen, SpaceX’s CFO, stated in testimony that there is no formal policy on investments from nations considered adversaries by the U.S. SpaceX has “preferences that feel like a policy,” leaning against ownership interests from countries including Russia, China, Iran, and North Korea. Johnsen, who has trust in Kahlon to attract approved investors, underscored the potential challenges financial ties with such countries could pose to winning government contracts.
Kahlon has facilitated multiple transactions for Chinese investors in SpaceX via offshore entities. He has been an integral part of SpaceX’s network, working with international regulators and helping investors including former Education Secretary Betsy DeVos acquire SpaceX shares.
The dispute has left unresolved the specific ownership percentage of SpaceX held by Chinese investors. However, the Delaware legal records emphasize the ongoing complexity and sensitivity surrounding SpaceX’s international investment practices and their implications for U.S. national security.
