(Bloomberg) — More than 1,000 current and former SpaceX employees have banded together to negotiate with wealth management firms for better pricing and access to sophisticated tax-saving financial products ahead of an initial public offering that is set to turn many of them into multi-millionaires.<\/p>\n
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The group has considered over 20 financial advisers and private banks, according to a May document summarizing the effort that was viewed by Bloomberg. The document said they were \u201cleveraging collective power\u201d in order to get \u201csignificantly lower fees\u201d for financial advice \u2013 with a goal of paying less than 0.5% on all assets under management, rather than the traditional 1% fee.<\/p>\n
Employees in line for IPO windfalls typically seek out their own wealth advisers. The SpaceX group\u2019s push for a kind of collective bargaining has the potential to create a new playbook for startup employees trying to figure out how to manage the wealth unlocked by blockbuster IPOs \u2013 a cohort that is about to grow much larger as OpenAI and Anthropic prepare to go public.<\/p>\n
The effort has been organized in a private Slack room and led by a former engineer at Elon Musk\u2019s rocket, satellite and artificial intelligence company, according to people close to the negotiations who asked for anonymity because the talks were private.<\/p>\n
There were more than 200 people in the group, representing at least $2 billion in wealth, according to an email sent to financial advisers earlier this year. The group has grown significantly since then and their assets are now estimated to be worth as much as $20 billion, the people said.<\/p>\n
\u201cWhat\u2019s interesting here is not that employees want financial advice. It\u2019s that they\u2019re recognizing their collective purchasing power and using it to negotiate access to specialized expertise,\u201d said Brian Werner, chief investment officer at Winthrop Partners. \u201cI would not be surprised if we see more employee groups at high-growth private companies pursue similar arrangements.\u201d<\/p>\n
The SpaceX staffers are seeking complex strategies like equity-based lending and direct indexing, the documents show. That\u2019s in line with a broader rush by sophisticated investors, such as hedge funds and family offices, looking to defer capital gain taxes on their rapidly growing equity portfolios.<\/p>\n
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The talks with wealth firms come at the same time that SpaceX executives are said to be pushing to cut the fees charged by the banks handling its IPO.<\/p>\n
Musk\u2019s company is planning to go public as soon as this month in what is expected to be the largest IPO ever, boosted by his ambition to dominate the market for AI computing power and satellite communications, and ultimately settle other planets. It is looking to raise as much as $75 billion in an offering that could give the company a valuation of at least $1.8 trillion, Bloomberg has reported.<\/p>\n
The company\u2019s S-1 filing said it places a \u201cheavy emphasis on equity compensation,\u201d but didn\u2019t specify how many of the company\u2019s 22,000 full\u2014time employees are included in the program.<\/p>\n
A spokesperson for SpaceX didn\u2019t respond to a request for comment.<\/p>\n
Big banks like Morgan Stanley and registered investment advisers including Creative Planning and Corient are among the firms considered by the SpaceX group, according to the May document.<\/p>\n
It said that the group did not consider broker-affiliated advisers due to their \u201ccomplex cost structures,\u201d or so-called robo-advisers because they are \u201cless suited for households with complex liquidity, tax and concentrated position planning needs.\u201d<\/p>\n
Morgan Stanley, Creative Planning and Corient declined to comment.<\/p>\n
Most of the negotiations have been led by former SpaceX engineer Aisha Ayoub, the people said. Ayoub did not respond to several messages requesting comment.<\/p>\n
Current and former employees have a complicated mix of stock options and restricted stock units, many of which will be unlocked on a staggered schedule after the IPO.<\/p>\n
They are looking for tools that could let them tap the value of their shares without the tax hit that would come from selling them. One such product is a variable prepaid forward contract (VPFC), a loan-like structure that allows a shareholder to borrow against equity holdings and get cash upfront.<\/p>\n
Other advanced financial instruments on the menu include options-powered strategies such as collars and box spreads, which together can work as a synthetic version of a VPFC \u2014 giving users access to cash without selling their equity holdings while limiting downside losses at a threshold.<\/p>\n
The group has also discussed strategies to diversify their portfolios, given their heavy exposure to the value of SpaceX. Direct indexing would allow them to own individual stocks inside an index rather than a bundled ETF, making it possible to avoid further exposure to SpaceX while also harvesting tax losses stock-by-stock.<\/p>\n
In negotiating, the group is aiming to get all such services with a \u201cgroup based discount\u201d and \u201c\u2019institutional\u2019 pricing,\u201d the May presentation said.<\/p>\n
Dominic Corabi, co-founder of Wedmont Private Capital, a wealth manager, said he believes these types of negotiations will become more common as more startup employees come into sudden wealth.<\/p>\n
\u201cBanding together into a cohort and negotiating from a position of strength is going to be, without question, the way to go,\u201d said Corabi. \u201cThey\u2019re going to get better terms, better pricing from custodians and product providers.\u201d<\/p>\n
–With assistance from Dylan Sloan.<\/p>\n
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