xAI is planning to raise $5 billion USD and early half the money is reportedly coming from SpaceX.
👉 Background: SpaceX is the Elon Musk's aerospace business with some pretty grand ambitions to establish a human colony on Mars and launch internet all over the world via Starlink. SpaceX is valued at more than $400 billion USD and has more than $3 billion USD in cash reserves.
👉 What happened: xAI is Musk's other baby - the creator of ChatGPT-competitor Grok. Now, xAI is planning to raise $5 billion USD. Nearly half the money is reportedly coming from SpaceX. This is all part of Musk’s strategy of cross-pollinating his empire.
👉 What else: It’s fair to say, Elon Musk has become the master of related-party transactions.
What's the key learning?
💡A related party transaction is when a company does business with another business or party that is closely connected. It might be a major shareholder, executive, or, in this case, another company controlled by the same person.
💡Musk is essentially using one of his more successful companies, SpaceX to bankroll one of his most speculative, xAI. In public companies, these deals usually involve a full review of the deal by directors and sometimes a vote. But on the SpaceX–xAI deal, Musk doesn’t face those hurdles because SpaceX is private.
💡This ain’t no surprise because Elon’s done this before… and quite recently! Earlier this year, xAI formally acquired X (formerly Twitter)... with a group valuation of $113 billion USD between the two companies … but no money actually changed hands.
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