Elon Musk’s Bankers Working to Reduce xAI Debt After SpaceX Merger
According to a recent report from Bloomberg, Elon Musk’s bankers are exploring ways to reduce the debt accumulated by xAI following its merger with SpaceX.
xAI has accrued a substantial $18 billion in debt over the years, partly due to acquisitions like Twitter (now X) and the establishment of an AI development company. Bankers are strategizing a financing plan to alleviate some of the hefty interest costs associated with this debt.
This financial maneuver aims to lessen the current financial strain ahead of SpaceX’s planned initial public offering (IPO) later this year. Musk recently confirmed SpaceX’s trajectory towards going public.
Leading Role of Morgan Stanley in Financing Plan
The report suggests that Morgan Stanley is expected to play a key role in the financing plan, as per sources familiar with the situation. Morgan Stanley, alongside Goldman Sachs, Bank of America, and JPMorgan Chase & Co., are anticipated to lead SpaceX’s potential IPO.
Since Musk’s acquisition of X, he has had a “mixed track record with debt markets,” as noted by Bloomberg. Following X’s acquisition with a $12.5 billion financing package, X currently pays substantial interest payments monthly.
The existing debt is held by Bank of America, Barclays, Mitsubishi, UFJ Financial, BNP Paribas SA, Mizuho, and Société Générale SA. The merger with xAI last March elevated the valuation to $45 billion, inclusive of the debt.
Strategic Merger Between SpaceX and xAI
SpaceX officially merged with xAI earlier this month, a significant move in Musk’s vision to revolutionize Earth’s data infrastructure by introducing orbital alternatives at reduced costs:
“In the long term, space-based AI is obviously the only way to scale. To harness even a millionth of our Sun’s energy would require over a million times more energy than our civilization currently uses! The only logical solution, therefore, is to transport these resource-intensive efforts to a location with vast power and space. I mean, space is called ‘space’ for a reason.”
The merger presents numerous advantages, particularly positioning the combined entities to support grander objectives fueled by revenue from Starlink expansion, potential IPO, and AI-driven applications that could expedite lunar base development.