As U.S. space company SpaceX prepared to list on the Nasdaq on the 12th local time, it completely blocked investors from China and Hong Kong from taking part in the offering. It is a move in the largest initial public offering (IPO) on record to selectively exclude capital from specific countries. Experts said the decoupling between the United States and China that began in trade—an effort to sever mutual dependence—has spread to the capital-raising stage for advanced technology corporations.
On the 11th, the New York Times (NYT), citing five people familiar with the matter, said SpaceX would not accept funds from investors based in mainland China and Hong Kong in this listing. SpaceX will offer 555.6 million shares in the IPO. According to the local investment banking industry, this is the first time investors from mainland China and Hong Kong have been entirely excluded from a major U.S. IPO. When U.S. AI Semiconductor corporation Cerebras listed last month, investors from China and Hong Kong took part in the offering.
Artificial intelligence (AI) corporation OpenAI is also highly likely to impose the same restrictions in the listing it plans to complete within this year. OpenAI had already not accepted Chinese investors in an earlier private funding round. Neither company disclosed why it excluded Chinese capital. It was also not confirmed whether the U.S. administration directly issued related instructions. However, for both companies, the U.S. government is their biggest transaction counterpart. SpaceX booked about $4 billion (about 6.1 trillion won) in sales last year from transactions with the U.S. government. OpenAI this year agreed to supply AI technology to the Ministry of National Defense's classified systems. Given the large share of national security business, the prevailing analysis is that they preemptively blocked the possibility that Chinese capital could enter via equity stakes and later hinder the award of government contracts.
The U.S. government has long filtered investments by Chinese capital in U.S. technology corporations through multiple layers. The Committee on Foreign Investment in the United States (CFIUS), which reviews investments by foreign capital in U.S. corporations from a security perspective, scrutinizes sensitive areas, and the Ministry of National Defense has placed leading Chinese corporations such as Tencent, Alibaba, Baidu and BYD on a list of "Chinese military–linked companies." The previous Joe Biden administration restricted investments targeting China across advanced industries such as quantum computing, semiconductors and AI. Han Lin, a former senior executive at Wells Fargo's China unit, told the NYT, "The latest restrictions reflect a broad perception among U.S. technology and AI corporations that they should avoid Chinese investment due to concerns over national security, intellectual property protection and data control," she said.
With the biggest IPO opportunity on record approaching and formal investment channels blocked, mainland China and Hong Kong–based investors carved out a detour through crypto assets. The Financial Times (FT) reported on the 10th that Chinese investors are using digital assets to evade capital controls and indirectly invest in popular U.S. unlisted stocks such as SpaceX and OpenAI. They buy the stablecoin Tether (USDT) with yuan to circumvent the government's annual per-person foreign exchange limit of $50,000 (about 76 million won), then purchase tokens designed to track the value of unlisted shares. PreSPAX, a SpaceX-linked token launched in April by crypto exchange Bitget, drew 14,435 buyers. As the Chinese government tightened restrictions on outflows of domestic capital earlier this month, such detour demand is growing.
These tokens have nothing to do with actual corporate stock ownership or voting rights. SpaceX and OpenAI do not recognize such backdoor transactions. Timothy Spangler, a crypto-specialist attorney, told the FT, "Many investors in China are paying large sums for promises that are not legally enforceable," he said.
Some noted that while SpaceX pushed out Chinese capital ahead of its listing, it still relies on China for core materials in future business supply chains. SpaceX CEO Elon Musk said that starting in the early 2030s, the company will place 100 gigawatts (GW) of solar AI data centers in Earth orbit every year. Bloomberg reported on the 11th that the materials alone for this plan would reach about 1 million tons a year, and that China in effect produces all of the gallium, the raw material for gallium arsenide, a high-efficiency solar panel material for space. The Chinese government has blocked exports of gallium to the United States in response to the U.S. semiconductor export ban. For polysilicon panels, an alternative, about 93% of global production capacity is concentrated in China. Bloomberg columnist David Fickling noted on the 12th, "As long as a large share of the hardware depends on Washington's main geopolitical rival, the path to orbit will be far tougher than before," he said.
China's space sector appears to be taking SpaceX's listing as a starting gun for a chase. The South China Morning Post (SCMP) in Hong Kong reported on the 11th that SpaceX's record listing is drawing capital into the space industry and that Chinese startup space corporations are in turn preparing to enter the stock market. Experts pointed to LandSpace as the "Chinese version of SpaceX." The company succeeded in a reusable rocket test in December last year, a first for a Chinese corporation, and is currently pursuing a listing on the STAR Market of the Shanghai Stock Exchange (a market for technology corporations dubbed China's Nasdaq). In its IPO prospectus, it said it would "counter SpaceX's first-mover advantage," mentioning SpaceX 37 times in a single document. Qianfan, a satellite internet network dubbed China's version of Starlink, has so far launched more than 200 low-Earth-orbit satellites. AI satellite corporation ADA Space filed a preliminary listing document for the Hong Kong stock exchange on May 14.
The Chinese government also unlocked related restrictions and encouraged related corporations. In November last year, after SpaceX set a record with its 94th Starlink launch, the China National Space Administration (CNSA) the same month announced an action plan to open national scientific research projects to private corporations. Blaine Curcio, a consultant specializing in China's space industry, told the business outlet Fortune, "China is watching Musk's actions very closely," and "In China, there is recognition that SpaceX's achievements are tremendously impressive by any standard," he said.