cross-posted from: https://lemmy.sdf.org/post/43361235

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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.

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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.

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Buying shares in SpaceX is much more difficult than buying a piece of a publicly traded company like Tesla or Microsoft. SpaceX has control over who can buy stakes in it, and the company’s investors fall into different categories. The most rarefied group is the direct investors, who actually own SpaceX shares. This group includes funds led by Kahlon, Peter Thiel and a handful of other venture capitalists with personal ties to Musk. Then there are the indirect investors, who effectively buy stakes in SpaceX through a middleman like Kahlon. (The indirect investors are actually buying into a fund run by the middleman, typically paying a hefty fee.) All previously known Chinese investors in SpaceX fell into the latter category.

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Kahlon has turned his access to SpaceX stock into a lucrative business. His investor list reads like an atlas of the world. The investors’ names are redacted in the recently unsealed document, but their addresses span from Chile to Malaysia. One is in Russia. At least two are in mainland China. One is in Qatar. (In one email to SpaceX’s chief financial officer, Kahlon said a Los Angeles-based fund had money from the Qatari royal family and was already invested in SpaceX.)

“You made a big fortune,” a China-based financier wrote to Kahlon four years ago. “Lol something like that. SpaceX has been the gift that keeps on giving,” Kahlon responded. “All thanks to you.”

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