Elon Musk’s Twitter backers gain windfall from xAI deal
Investors hit by losses following billionaire’s takeover of social media platform reap rewards from shares in his AI start-up
The connections between Elon Musk’s businesses are the latest example of the overlapping incentives for those who support his ventures © FT montage/AP
Investors in Elon Musk’s takeover of Twitter are set to make a huge windfall from a surge in the valuation of his artificial intelligence company, reaping rewards from being loyal backers of the billionaire’s business empire.
Musk has given investors that backed his $44bn Twitter acquisition 25 per cent of the shares in xAI, which he founded last year to take on rivals such as OpenAI and Anthropic.
xAI is set to close a new $5bn fundraising round as early as Wednesday, according to people with knowledge of the talks, doubling its valuation to $50bn in just six months.
xAI is set to close a new $5bn fundraising round as early as Wednesday, according to people with knowledge of the talks, doubling its valuation to $50bn in just six months.
That has meant some of Musk’s backers, who were sitting on billions of dollars of unrealised losses from the Twittertakeover, could be made “whole” through shares in xAI thanks to the start-up’s massive rise in value.
Those set to benefit as investors in both Musk companies include Fidelity, Oracle co-founder Larry Ellison, Saudi Prince Alwaleed bin Talal, Twitter founder Jack Dorsey and Silicon Valley venture firms Sequoia Capital and Andreessen Horowitz.
The connections between the Musk businesses are the latest example of the overlapping incentives for those who support his ventures, which also include electric-car maker Tesla and rocket builder SpaceX.
Many of his financial backers have justified their support of the takeover of Twitter, since renamed X, as a bet on Musk and a means to stay within his orbit. That thinking has been considered especially prescient as Musk has become a close confidant of president-elect Donald Trump.
“There are few adages in tech that really hold up,” said one investor in Musk’s companies. “Never bet against Elon is one.”
When this week’s funding round closes, xAI will have raised about $11bn of investment in total, needed for the huge spending required to build AI models and one of the world’s largest clusters of supercomputers.
Its rapid growth has been a boon for Twitter equity investors, from whom Musk secured $7.1bn to fund the takeover, with the rest generated by bank loans and Musk’s own fortune, including from selling Tesla shares. Banks including Morgan Stanley and Barclays are sitting on about $13bn of Twitter debt.
Since then, the value of the social media platform has crashed as advertisers have abandoned the site over content moderation concerns. Fidelity, which publicly discloses the value of its stake in X, has written down its investment by nearly 80 per cent, giving it a current value of $9.4bn.
Since then, the value of the social media platform has crashed as advertisers have abandoned the site over content moderation concerns. Fidelity, which publicly discloses the value of its stake in X, has written down its investment by nearly 80 per cent, giving it a current value of $9.4bn.
xAI carried out a $6bn fundraising in May, its first major cash injection from outside investors, which gave it a post-money valuation of $24bn. Many of Musk’s X backers chose to put even more cash into the start-up deal, such as Andreessen Horowitz, Sequoia Capital, Prince Alwaleed and Fidelity.
In its latest $5bn fundraising, only investors who had backed xAI in its previous fundraising had been permitted to invest, according to several people close to the matter.
In its latest $5bn fundraising, only investors who had backed xAI in its previous fundraising had been permitted to invest, according to several people close to the matter.
Musk wrote on X in November 2023 that X investors would own 25 per cent of xAI, but did not give further details.
People with knowledge of the matter said X investors had been granted a quarter of the equity in xAI across both fundraising rounds. Their stake was not diluted by the new shares issued following the close of the latest fundraise, they added.
People with knowledge of the matter said X investors had been granted a quarter of the equity in xAI across both fundraising rounds. Their stake was not diluted by the new shares issued following the close of the latest fundraise, they added.
While proving to be lucrative, the connected deals create a complex set of considerations for investors in Musk’s companies.
“It’s hard to manage conflicts of interest on this sort of stuff,” said an investor in one of the companies. “You have to be a fiduciary and you’re on both sides.”
“It’s hard to manage conflicts of interest on this sort of stuff,” said an investor in one of the companies. “You have to be a fiduciary and you’re on both sides.”
Musk did not respond to a request for comment.