July 22, 2026
SpaceX’s recent blockbuster initial public offering includes a novel and untested framework to steer shareholder disputes to Texas’ Business Court and arbitration while prohibiting investor class actions, in a move attorneys said will certainly be challenged in court and could lead to the company facing an impractical number of arbitration proceedings.
Lawyers expressed differing opinions on whether the Texas Business Court — SpaceX’s preferred dispute resolution forum — will be favorable to executives. Meanwhile, the aerospace giant’s plan to steer disputes to arbitration if they can’t be heard in Texas Business Court marks the first major IPO to take advantage of the U.S. Securities and Exchange Commission’s recent retreat from prohibiting such measures.
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Laura H. Posner, a partner in Cohen Milstein Sellers & Toll LLP’s securities litigation and investor protection practice, said in a statement to Law360 that SpaceX investors are “the only shareholders of a major public company who lack the settled protections, certainty, and legal consistency that investors have counted on for decades to protect their hard-earned retirement assets and that regulators have required to help ensure market integrity.” Cohen Milstein is part of the American Association for Justice, which is part of the Alliance to Protect Shareholder Value.
“The policies adopted by SpaceX decimate protections for shareholders and the market while giving near-total executive authority to Musk,” Posner said. “Musk’s attempt to prevent investors from ever being able to hold SpaceX management accountable for malfeasance, either through litigation or even voting, stand out as particularly problematic.”
Posner said that institutional investors will have to bring arbitrations under their fiduciary obligations to their members, but it isn’t a manageable way to conduct business to have Musk deposed hundreds of times for hundreds of separate arbitrations. SpaceX’s stock price has fallen below its offering price, and Posner said she wouldn’t be surprised if it continues to fall as post-IPO restrictions on shareholders selling their shares come to an end, among other things.
“No company in similar circumstances wants to be fighting hundreds, if not thousands, of arbitrations brought by angry investors,” Posner said.
Read SpaceX May Not Escape Shareholder Suits’ Orbit So Easily.