SpaceX in talks to merge with other Musk companies - Reuters
Kyiv • UNN
SpaceX is exploring opportunities to enter into agreements with other companies led by Elon Musk. In particular, mergers with xAI and Tesla are being considered.
SpaceX is exploring potential deals with other companies led by Elon Musk, leaving investors to work on combinations between space, autonomous driving, and artificial intelligence to analyze which combination makes the most sense, Reuters reports, according to UNN.
Details
The rocket maker is in talks to merge with xAI ahead of a planned initial public offering (IPO) this year, Reuters reported on Thursday. The merger would bring Musk's rockets, Starlink satellites, the X social media platform, and the Grok chatbot under one roof, according to a person familiar with the matter and two regulatory filings.
SpaceX is also considering a merger with Musk's electric vehicle maker Tesla, Bloomberg reports.
"I think it's very likely that (xAI) will end up on one of two sides," said Tesla shareholder Gene Munster, who is a managing partner at xAI investor Deepwater Asset Management.
Musk, the world's richest person, is CEO of SpaceX and the artificial intelligence company xAI, which controls X. He also runs Tesla, tunneling company The Boring Co, and neurotechnology firm Neuralink.
"It's important for Elon to have a grand vision that's far out, and he's early on," Munster said. A compelling prospect would be Tesla acquiring xAI, which would enhance the electric vehicle maker's plans for robots and self-driving cars, he said.
Polymarket's prediction market on Thursday late evening estimated a 48% chance of a SpaceX-xAI merger by mid-year, and a 16% chance of a Tesla-xAI merger.
Tesla's stock price rose 3% in after-hours trading.
SpaceX plans to go public sometime this year with a valuation likely exceeding $1 trillion, Reuters and other media reported. It is the world's most valuable private company at $800 billion from a recent private stock sale. In November, xAI was valued at $230 billion, according to the Wall Street Journal. Tesla's market capitalization is $1.4 trillion.
For SpaceX, a large deal could complicate an IPO but add momentum to efforts to launch data centers into orbit, a key goal in the escalating AI race against companies like OpenAI, Meta Platforms, and Alphabet's Google.
Some Tesla shareholders have long advocated for combining Musk's companies. Bloomberg reports that investors are pushing for a merger of SpaceX and Tesla.
"Musk has too many separate companies," said Dennis Dick, chief market strategist at Stock Trader Network. "The main risk thesis for Tesla is that Musk is too spread out. As a Tesla shareholder, I welcome further consolidation."
As part of a SpaceX-xAI merger, xAI shares would be exchanged for SpaceX shares. Two entities were created in Nevada to facilitate this, said a person familiar with the matter.
The documents state that these entities were created on January 21, but did not detail their purpose or role in any deal. One lists SpaceX and its CFO Bret Johnsen as managing members. The other lists Johnsen as the sole officer.
According to a source familiar with the matter, some xAI executives may be given the option to receive cash instead of SpaceX shares as part of the deal. According to the source, a final agreement has not yet been signed, and the timing and structure of the deal remain unchanged.
Space-based AI data processing, powered by solar energy, aims to reduce the cost of computing power needed to run and train AI models like xAI's Grok. Billionaire Jeff Bezos' Blue Origin has announced a high-performance backbone network of thousands of satellites, and Google is exploring space data centers as part of Project Suncatcher.
Speaking last week in Davos, Musk, whose predictions on timelines rarely materialize, said: "The cheapest place to put AI will be in space. And that will be true in two years, maybe three at the latest."
Building data centers in space is a risky undertaking given the rapid and unpredictable development of AI, the publication notes. Analysts and executives question whether the expected reduction in energy consumption justifies the cost of adapting systems for space.
The implementation of xAI could also boost SpaceX's prospects for contracts from the Pentagon, which is seeking to accelerate the adoption of AI in military networks, said Caleb Henry of Quilty Analytics, a research and consulting firm specializing in the space industry.
Pentagon chief Pete Hegset visited SpaceX's Starbase development site in Texas this month, where he stated that xAI's Grok language model and chat platform would be integrated into military networks as part of an "AI acceleration strategy" aimed at speeding up military decision-making and planning.
xAI has a contract worth up to $200 million to supply Grok products to the Pentagon. Through xAI, Musk is building a supercomputer for AI training in Memphis, Tennessee, called Colossus.
Starlink and the national security variant Starshield already rely heavily on AI, for example, for automated satellite management in orbit. Starshield, under contract with a US intelligence agency, is building a network of hundreds of secret satellites equipped with sensors that are expected to use artificial intelligence to track moving targets on Earth.
Addition
Musk has already combined businesses. In 2016, he used Tesla stock to buy solar energy company SolarCity. Last year, he merged X with xAI as part of a stock swap, giving the AI startup access to the microblog's data and distribution.
As the Wall Street Journal reported last year, xAI also received a $2 billion investment commitment from SpaceX as part of a $5 billion equity raise.
This month, xAI raised $20 billion as part of an expanded Series E funding round, exceeding its target of $15 billion at a valuation of $230 billion. On Wednesday, the company also secured a commitment of approximately $2 billion from Tesla.
Ross Gerber, CEO of Tesla and xAI investor at Gerber Kawasaki Wealth and Investment Management, said he could imagine a merger of Musk's businesses.
"It's like a bunch of overvalued companies merging into one big overvalued mess run by Elon. But now it's a clean play. It's kind of like: do you want to invest in Elon? Here you go. You get all of it. And it's actually much more attractive as an investment."