SpaceX received the lowest possible environmental, social and governance (ESG) rating from MSCI on June 11, one day before its record $75 billion public listing, adding fresh scrutiny to the Elon Musk-led company’s governance practices. The Financial Times reported that MSCI assigned Space Exploration Technologies Corp. a triple-C ESG rating, the same grade given to the Russian state on its government ESG scale after the 2022 invasion of Ukraine. MSCI stated the rating reflects that SpaceX is "lagging its industry based on its high exposure and failure to manage significant ESG risks."

The rating coincided with SpaceX’s public debut, where the company raised $75 billion and closed its first day of trading up more than 19%. Despite the stock rally, the ESG assessment highlights significant governance concerns. MSCI’s ESG framework measures how well a company manages financially relevant sustainability risks and opportunities relative to its industry peers.

Governance and Controversy Scores

SpaceX scored poorly across key governance and controversy metrics. The company received a score of 1 out of 10 in MSCI’s controversies category, accompanied by an "orange flag." This designation is assigned to companies with indirect involvement in one or more very severe ongoing controversies, or direct involvement in one or more severe ongoing controversies.

On governance metrics, SpaceX scored 3.2 out of 10. MSCI’s system starts companies at 10 and deducts points for corporate governance flags. A score of 0 out of 10 and a "red flag" is reserved for companies directly involved in very severe, ongoing controversies, such as Volkswagen AG in 2022 regarding allegations of forced labor.

Musk’s Criticism and Index Inclusion

Elon Musk has long criticized ESG ratings, previously calling them a "scam" after Tesla Inc. was removed from the S&P 500 ESG Index in 2022. Since SpaceX filed for its IPO, critics have raised questions regarding its share structure, limited shareholder rights, insider control, possible conflicts of interest, board independence, and pay oversight.

The timing of the rating is notable as index providers adjust rules for the new megacap listing. MSCI has adopted expedited procedures to speed SpaceX’s entry into benchmarks, while Nasdaq and FTSE Russell also altered rules for large IPOs. However, S&P Dow Jones Indices declined to fast-track SpaceX, requiring the company to meet standard eligibility rules.

SpaceX stock fell 1.84% in overnight trading last Thursday after closing 3.56% lower at $185.00 during the regular session. Benzinga reached out to SpaceX and MSCI for comment but did not receive a response by the time of publication.

Jeremy Grantham, the GMO co-founder known for predicting historical market crashes, has identified SpaceX as a bubble due to its valuation of 100 times sales. During a recent appearance on the Odd Lots podcast, Grantham criticized the company's prospectus, arguing that roughly 90% of its value is derived from artificial intelligence expectations he deems unrealistic. He warned that such mega listings could destabilize the S&P 500 from within, drawing parallels to historical manias like the South Sea Bubble.

Grantham contends that SpaceX's own AI technology is underperforming compared to rivals. He noted that investors are prioritizing a compelling narrative over factual performance, a behavior he believes characterizes the current market environment. According to Grantham, future historians will view the SpaceX prospectus as a "novel slash joke" if the market collapses as he anticipates.

AI Competitiveness and Market Odds

The skepticism regarding SpaceX's AI capabilities is reflected in current prediction market data. Polymarket indicates that xAI has only a 5% chance of possessing the best AI model by the end of the year. In contrast, Anthropic holds a 61% probability of leading the sector. This data suggests a significant disconnect between SpaceX's valuation and the perceived strength of its AI technology relative to competitors.

Prediction Market Forecasts

Traders on Polymarket currently assign a 13% probability to SpaceX reaching a $3 trillion valuation this month, a decrease from earlier in the week. The broader market sentiment also shows limited immediate concern for Grantham's bubble thesis, with only a 21% chance of an AI bubble bursting this year and a 13% chance of a recession occurring within the same timeframe.

Risks to the Magnificent Seven

Grantham extended his critique to the "Magnificent Seven," arguing that the era of comfortable monopolies is ending. He posited that these companies are now engaged in a capital-intensive AI race where only one winner is likely to emerge. He warned that the market continues to price these stocks as safe monopolies rather than competitors in a high-stakes "dogfight," creating a potential disconnect between current valuations and future profitability.