CHINA WATCHElon Musk’s SpaceX Took Money Directly from Chinese Investors, Company Insider Testifies
The newly unsealed testimony marks the first time direct Chinese investment in the company has been disclosed, raising new questions about foreign ownership interests in one of America’s most important military contractors.
Elon Musk’s 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’ most important military contractors.
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.
“They obviously have Chinese investors to be honest,” Iqbaljit Kahlon, a major SpaceX investor, said in a deposition last year, adding that some are “directly on the cap table.” “Cap table” refers to the company’s capitalization table, which lists its shareholders.
Kahlon’s 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’s leadership and runs his own firm that acts as a middleman for wealthy investors looking to buy shares of SpaceX.
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.
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’s Starlink internet service too. Musk’s roughly 42% stake in the company is worth an estimated $168 billion. If he owned nothing else, he’d be one of the 10 richest people in the world.
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.
If the investors got access to nonpublic information about the company — say, details on its contracts or supply chain — 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 “would create huge risks that, if realized, would have huge consequences for national security,” she said.
