According to the Financial Times, SpaceX and xA executives briefed investors on the details of the merger deal. They revealed that Elon Musk will be at the helm of the combined company and confirmed that SpaceX will conduct an initial public offering (IPO) in June this year.


Musk consolidates business empire

Musk completed one of the boldest deals of his career on Monday, merging SpaceX with xAI to create the most valuable private company in history.The merger, valued at $1.25 trillion, combines Musk's dominant rocket maker with his loss-making AI startup xAI and social media platform X.

Supporters hailed the merger as another testament to Musk's genius. He combined reusable rockets and Starlink satellite networks with X’s data and xAI’s models to create a synergistic effect.

Critics believe that this is just another typical case of financial engineering, with Musk using his personal brand and SpaceX to "transfuse" xAI, which burns $1 billion in cash every month.

“None of the valuations are based on any rational financial logic,” said one person who invested in xAI. “They are all betting on Elon himself.”

Merge details

Since SpaceX invested $2 billion in xAI last summer, rumors have circulated that the two companies would merge. However, multiple people told the Financial Times that most shareholders were still in the dark when news of formal talks began to emerge last week and were caught off guard by the speed with which the deal was concluded.

Investors were informed of the situation via a hasty conference call hosted by SpaceX Chief Financial Officer Bret Johnsen and Jared Birchall, xAI’s head of day-to-day operations.Many people could barely hear the limited details of the $1.25 trillion merger deal due to multiple delays and poor sound quality.

Johnson told investors that SpaceX will acquire xAI for $250 billion, a price that is roughly in line with the latter’s valuation in a recent $20 billion financing round. That round valued the two-year-old startup at $230 billion.

xAI shares will be converted into SpaceX shares at an exchange ratio of approximately 7:1, with the combined entity’s share price set at $527 per share.


Starship test flight

Musk also raised SpaceX's private equity valuation to US$1 trillion, based on the revenue growth of Starlink broadband services. The valuation is $200 billion higher than the company's valuation when it sold shares on the secondary market in December.

Birchall said in the conference call that Musk will take charge of the combined entity and that the transaction will be completed on March 16 this year. Investors can choose to cash out rather than exchange their xAI shares for SpaceX shares.

"This merger is a testament to great engineering capabilities. Space, data centers, and solar energy used to be independent businesses; looking to the future, they are converging on the same track." Sol Bier, founder of Factorial Funds, which invested in the two companies, pointed out, "The bottleneck of AI development is energy, and Elon has just provided a solution through vertical integration."

June IPO

Musk's executive team also confirmed that SpaceX still plans to IPO in June. Musk insisted on this time point because there will be a rare three-dimensional conjunction of Jupiter, Venus and Mercury that month.

SpaceX's IPO could raise up to $50 billion, making it the largest IPO in history, surpassing the US$29 billion raised by Saudi Aramco in 2019.

Investors believe that such a tight timetable has less to do with the movement of celestial bodies and more to do with Musk's desire to get a head start and go public earlier than OpenAI and Anthropic. The latter two companies are negotiating with investment banks to go public this year, and their model technology is more mature than xAI and their revenue capabilities are stronger. However, investment bankers are worried that the public market may not have enough funds to undertake the listing of three companies at the same time, which means that the first to go public will have a first-mover advantage.

Some long-term shareholders who have invested in SpaceX have broader concerns. They believe that a merger with xAI, which has suffered heavy losses, will complicate the IPO process or even jeopardize the listing. To complete the deal, SpaceX will issue an additional $250 billion worth of new shares, thereby diluting the shareholding ratio of existing shareholders.

However, since Musk controls both private companies, there is little outsiders can do to stop the deal.

SpaceX revealed to investors that its annual revenue has grown to $16 billion thanks to its monopoly in commercial rocket launches and the surge in the number of Starlink users. Last week, the company applied to regulators to launch 1 million satellites to build an "orbital data center system," which is a huge jump from the current scale of 9,400.

By comparison, xAI's revenue last year was just a few hundred million dollars. The company recently warned, it may be necessary to invest more than US$10 billion in 2025 to purchase chips and build large-scale data centers needed to train and run advanced artificial intelligence systems.

"This is a win-win situation, but xAI shareholders will benefit more, and xAI's competitiveness is limited if it works alone. Google and OpenAI dominate the consumer market, while Anthropic controls enterprise customers." said an investor in xAI.

He added: "So the reality is that he has no choice. He cannot let xAI develop independently. Musk is a genius, and this may have been in his plan."

Investors are now speculating that SpaceX and the electric car maker may eventually merge after Tesla announced a $2 billion investment in xAI and further shifted its strategic focus to the fields of AI chips and humanoid robots.