Through a regulatory filing, Tesla Motors has formally established its role in the restructuring of Elon Musk's business empire. The move comes ahead of a potential initial public offering by SpaceX that could set a new record for fundraising, with Tesla gaining a stake in SpaceX by converting its investment in xAI.
A filing with the U.S. Federal Trade Commission dated March 11 shows that Tesla has received government approval to convert its investment in xAI into a small equity position in SpaceX. This action formalizes the financial link between two of Musk's core businesses at a critical juncture as SpaceX prepares for a public listing.
On March 12, media reports citing informed sources indicated that this equity conversion is directly related to Tesla's previously announced investment of approximately $2 billion in xAI, corresponding to a stake of less than 1% in SpaceX.
The same FTC filing also reveals that Musk is selling SpaceX shares to investors including Valor Equity Partners and DFJ Growth. While the filing is mandatory for transactions exceeding $133.9 million, it does not disclose the specific size of the stakes involved. Tesla Motors, SpaceX, and Musk have not commented on the matter.
**Tesla's Bet on xAI: From Investment to Integration**
In late January, while announcing its fourth-quarter results, Tesla revealed plans to invest around $2 billion in Musk's artificial intelligence startup xAI. The investment, made through preferred shares in xAI's latest funding round, was accompanied by a "framework agreement" intended to strengthen the relationship between the companies and enhance Tesla's capability to deploy AI products and services in the real world.
At the time, Matt Maley, Chief Market Strategist at Miller Tabak + Co., stated that this investment was precisely the signal bullish Tesla investors wanted to see, suggesting that if Tesla performs as well as bulls expect, it will be due to its robotaxi and robotics businesses.
Subsequently, in February, xAI and SpaceX announced a merger, valuing the combined entity at $1.25 trillion. xAI had previously incorporated the social media platform X, formerly known as Twitter. Musk acquired Twitter in 2022, renamed it X, and later merged it into xAI at a valuation of $33 billion. The merger between xAI and SpaceX was the direct trigger event that enabled the conversion of Tesla's $2 billion investment into a stake in SpaceX.
**SpaceX Reportedly Explored Merger with Tesla or xAI**
According to reports from January, SpaceX was at that time exploring the feasibility of a merger with Tesla Motors, with some investors actively pushing for this direction. Simultaneously, SpaceX was also studying the possibility of a merger with xAI. Following the news, Tesla's stock price saw an intraday surge of up to 5.6%.
Informed sources indicated then that any potential transaction could attract large-scale participation from infrastructure funds and Middle Eastern sovereign investors, but no final decision had been made, and the parties might also choose to remain independent. With the SpaceX-xAI merger now completed, the path to a direct merger between Tesla and SpaceX has, for the moment, been replaced by this more limited financial linkage achieved through the equity conversion.
**SpaceX IPO: Largest-Ever Listing Imminent**
Tesla's stake conversion occurs against the backdrop of SpaceX actively preparing for its public debut.
Reports indicate that SpaceX plans to list as early as June this year, aiming to raise up to $50 billion with a target valuation exceeding $1.75 trillion. This could surpass the $29.4 billion IPO record set by Saudi Aramco in 2019, making it the largest IPO in history. Bank of America, Goldman Sachs, JPMorgan, and Morgan Stanley are expected to play key roles as lead underwriters in the offering.
However, SpaceX's all-stock acquisition of xAI prior to the listing has raised concerns among some investors.
xAI's cash burn of approximately $1 billion per month, primarily for AI infrastructure development, somewhat dilutes the appeal of SpaceX's core asset—the Starlink satellite internet service—to public market investors. Critics argue that if SpaceX is perceived as a loosely structured, diversified conglomerate, its valuation could fall short of expectations.
For Tesla Motors, this stake conversion means its balance sheet will formally incorporate the prospect of SpaceX's public listing. Investors betting on the electric vehicle company's transition towards AI and autonomous driving thus gain an additional layer of exposure linked to the space business.
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