2 days ago

SpaceX: Washington’s Next Investment Frontier?

In August 2025, the US Commerce Secretary Howard Lutnick famously floated the idea that the Donald Trump Administration was contemplating to acquire equity stakes in major U.S. defence contractors such as Lockheed Martin which makes 97% of their revenue from the U.S. government.

He said the company was basically “an arm of the U.S. government.” The deal would be in the ‘Intel model’ where the US Govt had taken a 10% equity stake worth ~$9 billion in the chip maker, using the CHIPS Act funding or at least that was the template.

In January this year, Pentagon followed through with a $1 billion investment — structured as convertible preferred equity — in L3Harris’s Missile Solutions business – slated to be spun off and made public in 2026. Sam alters the trajectory: Enter OpenAI CEO Sam Altman.

He said he and White House officials have been in ongoing talks about a possible government stake in the company, since 2025, as speculated by the media. Now, Trump wants to walk the talk on a bigger scale; recently, the US President confirmed that the administration may invest directly in ‘pivotal sectors’ of the economy.

This includes not just OpenAI but potentially other leading AI and tech companies too. With SpaceX and OpenAI set to join the mega IPOs along with Anthropic, the question is to what extent the US would seek a stake for itself and whether it has any legal authority to seize stakes in companies like SpaceX.

An arm of Uncle Sam?

Perhaps, Altman knows the potential advantage and the risks, but for Elon Musk, it could only be a not-so-easy scenario – if the Administration terms his trillion-dollar company tomorrow as “basically an arm of the U.S. government” like the Lockheed Martin. Besides, he would have to deal with mercurial men like Lutnick and Hegseth besides Trump himself.

To be fair, one-fifth of SpaceX’s revenue in 2025 was from the government agencies. In fact, NASA and the U.S. Department of Defense collectively contribute to approximately 20% of SpaceX’s revenue; however, government contracts constitute a significantly larger portion of its long-term backlog, positioning Washington as one of the company’s most crucial clients.

But given his off and on relationship with Trump, there’s no room for brooding because the SpaceX’s IPO is about to hit the markets on June 12. Like Musk, bankers and syndicates are also anxious if the government could or would seek a stake at the IPO price or through ‘legal’ means.

Here, the US government seems to be following an interesting path; something that Saudi Arabia or Singapore follows. Uncle Sam is transforming subtly – from a regulator and customer to an investor in key industries – as shown by initiatives like the CHIPS Act and most of the AI programs. Washington may be adopting a Singapore style sovereign investment strategy, utilizing public funds not only to mature the critical industries, but also help them add more long-term value.

History repeated or rejigged?

Historically, it has been quite uncommon for a private enterprise to directly distribute IPO shares to a government entity. Governments have typically taken equity positions in private companies primarily during periods of financial turmoil, such as the global financial crisis of 2008, when bailout packages were traded for ownership stakes.

The U.S. Treasury secured a substantial interest in General Motors during its financial rescue, while the insurance behemoth AIG became almost 80% owned by the government following the receipt of urgent financial assistance. Nevertheless, these instances were exceptional rescue efforts rather than standard IPO distributions.

Under a leadership similar to that of Trump, this would also signify a model that leans more towards proactive and impactful industrial investment, contrasting with the traditional ‘hands-off approach’ that has defined prior government investments

Here, interestingly, Elon Musk seems to be veering towards a 30% of IPO allocation to retail investors – a bit unusual given the fact that in general, IPOs provide around 5–10% reserved for retail. So – is he trying to avoid any larger-scale influence from its biggest customer which, then, could come at the cost antagonising the substantial retail investor base – the more vocal American public?

Sreevalsan M