This summer's IPO of Space X became the largest ever in history based on market capitalization, and the company is now the world's seventh most valuable listed company.
Attention surrounding the company and speculation about the stock's performance has also been extensive, partly because Elon Musk is the founder.
To invest or not therefore became a major question before the listing. Now - in connection with its half-year report - AP7 is announcing what it chose to do. In its case, it was a clear no after the sustainability analysis it conducted of the company before the listing, says Lena Fahlén.
There were two reasons for this: first, shortcomings in corporate governance, and above all, a lack of a way to manage risks linked to human rights. Specifically, this is about the lack of processes and routines to prevent illegal content from being generated and published on the underlying AI companies' platforms, she says.
Merged the companies
The background is that earlier this year Musk merged Space X with the AI company xAI, which makes the X platform a subsidiary of Space X.
X (formerly Twitter) has been under scrutiny since Musk's acquisition, including over its AI service Grok. Earlier this year, the company was rocked by a huge scandal when it emerged that Grok was being used to produce fake nude images of women and children.
Illegal content linked to the sexualisation of children has been found. The company has not denied this, nor has it been able to show that it has taken measures to prevent it from happening again. We find that challenging, says Lena Fahlén.
If Grok had not been part of the company, would your view have been different?
You own X, we have seen similar incidents there too, so it is actually connected to AI companies under Space X. It is primarily a lack of processes to be able to manage these risks.
Additional problems
In addition to this, further problems are seen.
Elon Musk is both CEO and chairman of the board. There is limited influence for minority shareholders. Here we assess that it will not be successful to engage in a dialogue with the company.
AP7 has previously chosen to also rate Tesla, Musk's other major company. However, Lena Fahlén points out that this has been done for other reasons, namely violations of union rights in the US.
The decision now means that around six million Swedes who have AP7 will not become partners in Space X.
However, hopes of a price surge have not materialised. After initially rising, the share price is now essentially unchanged compared with the IPO.
Around six million Swedes have the Seventh AP Fund as their premium pension choice through the state pre-selection alternative AP7 Såfa.
It consists of AP7 Equity Fund and AP7 Fixed Income Fund.
During the first half of the year, AP7 Såfa had a total return of 17.9 percent, with the equity fund rising 20.4 percent and the fixed income fund rising 1.6 percent.
By comparison, the Stockholm Stock Exchange's OMXS index has risen 9 percent and the broad S&P 500 index in the US has risen around 12 percent.
The upturn has been concentrated in AI-related parts of the market, AP7 writes in its semi-annual report.
"For AP7, the underweight in China has been positive, while the overweight in other emerging markets, not least Taiwan and South Korea, has contributed positively," it states.
