Records show China-linked investors bought SpaceX stakes before IPO
ProPublica says a private investor list identifies overseas backers who bought into SpaceX through Tomales Bay Capital before the company went public.
By Maya Lindqvist · Senior Technology Correspondent
4 min read
Investors with addresses or business ties in China, Hong Kong and Russia bought stakes in SpaceX before its public offering, according to a private investor list obtained by ProPublica. The records add detail to a sensitive question for Elon Musk’s rocket company because SpaceX has built major parts of its business on classified and national security work for the U.S. government.
ProPublica reported that at least a dozen investors with addresses in mainland China, Hong Kong or Russia acquired SpaceX interests through Tomales Bay Capital, a U.S. investment firm. The investments listed in the records ranged from $800,000 to $40 million and were made between 2018 and 2021, according to ProPublica.
Bloomberg reported that SpaceX barred investors from China and Hong Kong from taking part in its initial public offering last week, citing regulatory and compliance risks. The U.S. government has alleged that China uses investments in sensitive industries to support espionage and gain access to advanced technology, ProPublica reported.
There is no ban on Chinese investment in U.S. military contractors, but such investments are subject to close regulation, according to ProPublica. SpaceX did not respond to ProPublica’s questions.
Chinese venture investor named in records
One listed investment came from an entity owned by David Su, co-founder of the Beijing venture capital firm MPCi, according to ProPublica. The investor list shows that Su’s entity put $15 million into a SpaceX fund in 2020, ProPublica reported.
ProPublica reported that MPCi has backed Chinese companies that compete in the space sector. Two satellite companies that received investment from Su’s firm were sanctioned by the U.S. government over alleged assistance to Russia’s Wagner Group, and one of them was sanctioned again last month over alleged help to Iran in attacks on U.S. military forces, according to ProPublica.
MPCi told ProPublica that Su “has not received any nonpublic information of SpaceX.” The firm described Su as a Singapore citizen living in Singapore and said MPCi is a brand name used by different teams and funds, with Su responsible for U.S. dollar funds.
Sarah Bauerle Danzman, an Indiana University professor who has worked for the State Department reviewing foreign investments, told ProPublica that U.S. officials would focus on whether China-based investors gained access to private information about SpaceX technology or strategy. She said conflicts involving Chinese competitors could raise national security concerns.
Middleman firm drew court scrutiny
The records emerged from a Delaware corporate dispute involving Tomales Bay Capital, according to ProPublica. The court files were unsealed this month after ProPublica sought public access with help from the Reporters Committee for Freedom of the Press and the law firm Shaw Keller; the Delaware Supreme Court ruled in ProPublica’s favor after Tomales Bay appealed.
Tomales Bay Capital is run by investor Iqbaljit Kahlon, who has had close ties to SpaceX leadership, according to ProPublica. SpaceX chief financial officer Bret Johnsen testified that Kahlon had been connected to the company longer than Johnsen had, ProPublica reported.
ProPublica reported that Kahlon’s firm bought SpaceX shares, placed them into funds and charged fees to investors who bought into those funds. In meeting minutes later filed in court, Kahlon promised a potential investor in China quarterly business updates, SpaceX visits and chances to interview with SpaceX’s CFO, according to ProPublica.
A lawyer for Tomales Bay, Ryan Stonerock, told ProPublica that the firm did not give investors nonpublic or sensitive SpaceX information. He said the investors were passive limited partners and received fund financials, including quarterly valuations, but no additional SpaceX information.
Stonerock also told ProPublica that the “vast majority, if not all” of the investors on the unsealed list were not citizens of foreign adversaries, including China or Russia, and were not agents of those governments. He said some investors may have mailing addresses in China or Russia while living in the United States or other countries.
Qatar-linked funds also listed
The investor list also shows funds affiliated with Bracket Capital investing about $48 million through deals from 2017 to 2020, according to ProPublica. Bracket has offices in Los Angeles, London and Qatar, and Kahlon wrote in an email to SpaceX’s CFO that Bracket had money from the Qatari royal family, ProPublica reported.
ProPublica said the documents do not show whether Bracket’s SpaceX investments were made for the royal family or for another client. Bracket did not respond to ProPublica’s requests for comment.
The stakes listed in the records represented small portions of SpaceX, but their value would have risen sharply as the company’s valuation grew, according to ProPublica. ProPublica reported that SpaceX’s valuation increased from $33.3 billion in 2019 to $2.7 trillion as of Wednesday morning.
This story draws on original reporting from Ars Technica.