FAA bars employees from purchasing SpaceX stock

If you work at the Federal Aviation Administration and had your eye on SpaceX stock, the answer is a firm no. The FAA’s ethics and conflict-of-interest rules explicitly prohibit employees from holding securities in companies the agency oversees, and that includes Elon Musk’s spacecraft and rocket manufacturer.

The restriction doesn’t just apply to the employees themselves. Spouses and minor children of FAA personnel are also barred from owning stock in airlines, aircraft manufacturers, and related suppliers. SpaceX, which falls under the FAA’s purview for commercial space launch licensing, sits squarely in the “don’t touch” column.

The policy and why it matters now

The FAA’s prohibition policy, last updated on March 23, 2022, is nothing new. It’s a standard government ethics guardrail designed to prevent regulators from having a financial stake in the companies they’re supposed to be objectively overseeing.

SpaceX has been moving toward a public offering, and the company’s valuation has ballooned to the point where early equity holders are sitting on life-changing money. Thousands of current and former SpaceX employees hold equity that could be worth well over $1 million each once shares become publicly tradable.

The directed share program that SpaceX has structured would allocate up to 5% of IPO shares to employees and select “friends and family” participants. That’s separate from standard employee stock purchase plans and represents a meaningful chunk of the offering reserved for insiders and their circles.

FAA employees, naturally, won’t be in any of those circles.

The regulatory firewall in practice

The FAA licenses commercial space launches, inspects launch sites, and has the authority to ground operations if safety standards aren’t met. If FAA personnel could profit from SpaceX’s stock price going up, there would be an obvious incentive, conscious or not, to be more lenient in regulatory decisions.

This kind of financial firewall exists across multiple federal agencies. The SEC has similar rules for its staff regarding securities firms. The Federal Reserve restricts its officials from trading individual bank stocks.

What makes the SpaceX situation notable is the sheer scale of the potential windfall. SpaceX is one of the most valuable private companies on Earth, with shares reportedly priced around $135 in the context of its public offering plans. The gap between what SpaceX employees stand to gain and what FAA employees are forced to sit out is, to put it mildly, visible from orbit.

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