SpaceX (NASDAQ:SPCX) received the lowest possible environmental, social and governance (ESG) rating from MSCI one day before its record $75 billion public listing, adding fresh scrutiny to the Elon Musk-led company’s governance as its stock continues to draw heavy investor demand.
MSCI Rating Shadows SpaceX Post IPO Rally
The Financial Times reported on Sunday that MSCI gave Space Exploration Technologies Corp. a triple-C ESG rating on June 11, the same grade MSCI assigned to the Russian state on its government ESG scale after the 2022 invasion of Ukraine. MSCI said the rating left SpaceX "lagging its industry based on its high exposure and failure to manage significant ESG risks."
According to MSCI, ESG is an industry-relative risk framework that measures how well a company manages financially relevant sustainability risks and opportunities.
The rating came just before SpaceX’s record public debut, when the company raised $75 billion and closed its first day of trading up more than 19%.
Controversy Score Adds To SpaceX Governance Concerns
SpaceX also scored one out of 10 in MSCI’s controversies category and received an "orange flag." MSCI assigns that score to companies with indirect involvement in one or more very severe ongoing controversies, or direct involvement in one or more severe ongoing controversies.
The company, which includes Starlink, its space operations and AI startup xAI, scored 3.2 out of 10 on MSCI’s governance metrics. The system starts companies at 10 and deducts points for corporate governance flags.
Companies receive a 0 out of 10 and a "red flag" only when they are directly involved in very severe, ongoing controversies. The FT noted that Volkswagen AG (OTC:VWAGY) received a red flag in 2022 after allegations of forced labor in China’s Xinjiang region.
Benzinga reached out to SpaceX and MSCI for comment, but did not receive a response at the time of publication.
Musk Has Long Criticized ESG Ratings
ESG ratings have long angered Musk. After Tesla Inc. (NASDAQ:TSLA) was removed from the S&P 500 ESG Index in 2022, Musk called ESG a "scam" that had been "weaponized by phony social justice warriors.”
Since SpaceX filed for its IPO, critics have questioned its share structure, limited shareholder rights, insider control, possible conflicts of interest, board independence and pay oversight.
The timing is notable because index providers have moved quickly to accommodate SpaceX. MSCI has adopted expedited procedures that could speed its entry into benchmarks, while Nasdaq and FTSE Russell also changed rules for megacap IPOs. S&P Dow Jones Indices declined to fast-track SpaceX, meaning the company still faces standard eligibility rules.
Price Action: SpaceX stock fell 1.84% in overnight trading last Thursday after closing 3.56% lower at $185.00 during Thursday’s regular trading session.
According to Benzinga Edge Rankings, SPCX stock exhibits a poor price trend across short-, medium-, and long-term horizons.
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