Musk Is Said To Offer X's Investors xAI Shares As Compensation For The Social Media's Plummeting Valuation
1min read According to media reports citing sources, investors in social media platform X are reaping huge returns, thanks to the surging valuation of xAI, an artificial intelligence (AI) startup under the world's richest man, Elon Musk, which has led to a distribution of xAI shares to investors who previously helped him acquire X.
Musk acquired X (then known as Twitter) in October 2022 for $44 billion, completing its privatization. When Musk first proposed the acquisition of X, his offer was nearly 40% higher than X's market value. After Musk took over X, the company's value shrank dramatically, with an investment firm stating in September that X's valuation had shrunk to $9.4 billion, a nearly 80% drop from the purchase price.
During Musk's acquisition of X, some investors collectively contributed $7.1 billion, with the remaining funds coming from bank loans and Musk's own wealth. These investors included Fidelity Investments, Oracle co-founder Larry Ellison, Twitter founder Jack Dorsey, and Silicon Valley venture capital firms Sequoia Capital and Andreessen Horowitz.
It is reported that Musk offered the aforementioned investors a 25% stake in xAI.
Musk established xAI last year to compete with OpenAI. According to media revelations, xAI raised $5 billion in its latest round of financing, and its valuation reached $50 billion, doubling in just half a year.
In May of this year, xAI conducted its first round of financing at a valuation of $24 billion, raising $6 billion. At that time, Sequoia Capital, Andreessen Horowitz, Alwaleed, and Fidelity Investments, among other X investors, chose to continue injecting funds into xAI.
Inside sources revealed that in the latest $5 billion round of financing, only investors who had participated in the first round were allowed to continue investing.
Musk had stated in November 2023 on X that X investors would own a 25% stake in xAI, but he did not provide specific details at the time.
Insiders say that in the two rounds of financing, X investors obtained a quarter of xAI's shares, and the new shares issued in this round of financing did not dilute their holdings.
Many investors view their support for Musk's acquisition of X as a trust in Musk himself and a way to integrate into his business network. Given that Trump is about to return to the White House and Musk enjoys his trust, this strategy appears particularly wise.
An investor in Musk's enterprises said, There are few adages in tech that really hold up - Never bet against Elon is one.