xAI Buys X in Blockbuster Deal. Elon Musk Found a Way to Win the Twitter Deal.
How do you solve a problem like Twitter? If you’re Elon Musk, you sell X to xAI.
He did OK on the sale.
In a Friday evening tweet on X, Elon Musk wrote that xAI had acquired X for $33 billion, or “$45 B less $12B debt.”
In his tweet, Musk explained the rationale behind the deal. “xAI and X’s futures are intertwined,” he wrote. “Today, we officially take the step to combine the data, models, compute, distribution and talent. This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach. The combined company will deliver smarter, more meaningful experiences to billions of people while staying true to our core mission of seeking truth and advancing knowledge. This will allow us to build a platform that doesn’t just reflect the world but actively accelerates human progress.”
Musk paid $44 billion for Twitter when he bought it in October 2022. That was essentially all equity. Musk paid $54.20 per Twitter share and financed the deal using debt. The $45 billion value, including debt, means that the total value of X rose under Musk’s sometimes tumultuous leadership.
Musk famously told advertisers leaving his social-media platform to “go f—yourself” in a 2023 interview.
Part of the increase in value was xAI itself. X owned 10% of xAI, according to Rainmaker Securities, a firm that deals in transactions for privately held companies.
The debt financing, X cross-ownership of xAI, and sale of X to xAI show that Musk isn’t only an impressive engineer of cars and rockets, he’s an impressive financial engineer, too.
Musk owned an estimated 80% of X and an estimated 50% of xAI, which he founded in 2023. According to Musk, the deal values xAI at $80 billion. That is likely the pre-X-purchase valuation, so Musk’s stake in the new xAI should be worth north of $65 billion. (That’s 50% of xAI and 80% of the equity value of X.)
X declined to comment on valuation and referred Barron’s to Musk’s tweet. It isn’t hard to get to $80 billion for xAI. OpenAI is valued at an estimated $300 billion. xAI was valued at $50 billion in November.
Musk’s holding in SpaceX is worth some $140 billion based on recent private market transactions. His Tesla stake is worth more than $170 billion, including contested stock options.
The one thing the X-xAI merger does for Tesla shareholders is lower the likelihood that Musk will have to sell Tesla stock to add capital to X. xAI is building AI models to compete with Alphabet and OpenAI and shouldn’t have any problem raising capital.
“This is a game changer and we believe the first step to Musk putting this all together under one hood and Tesla playing a major role,” said Wedbush analyst Dan Ives. “This deal makes Musk a key AI player.”
Combining Tesla with any of Musk’s other business ventures isn’t assured. Investors will be happy that Musk is consolidating some of his CEO jobs.
Shares of Tesla, the only publicly traded Musk company, were down 0.7% at $261.76 in after-hours trading Friday.
This isn’t the first time a Musk company has bought a Musk company. In 2016, Tesla bought Solar City, another Musk company, for $2.6 billion in an all-stock deal.
That business is part of Tesla’s nonautomotive operations, which also include stationary power storage for homes and utilities. Over the past five years, Tesla’s annual nonautomotive sales have grown from roughly $4 billion to $21 billion.