Elon Musk’s megadeal between X and xAI breaks Wall Street’s rulebook

Subscribe to enjoy similar stories. Elon Musk struck what could be considered the biggest deal of the year, and he broke all the normal rules. Musk’s splashy merger of the social-media company X and his artificial-intelligence startup xAI values the combined company at over $110 billion.

That would be a blockbuster deal on Wall Street. But this one is unorthodox, even by Musk’s standards, for a whole host of reasons. The valuation was surprising and so was how the companies got there.

Only one set of advisers worked for both sides, when a deal of this size would normally take armies. In short, the unusual process resulted in a megadeal few public companies could get away with. That deal consists of a $33 billion price tag for X, alongside a $80 billion valuation for xAI.

The new $80 billion valuation figure for xAI is a big jump from just four months ago, when the company was valued at $50 billion in its last fundraising. The new level was set as part of the merger talks, not in a new funding round. “It’s funny money," said Andrew Verstein, professor of law at the University of California, Los Angeles, Law School.

“It’s like using Monopoly money to buy Pokémon cards." The deal is an all-stock transaction, so no cash is expected to change hands. X and xAI shares will be traded for stock in a new holding company, meaning the companies essentially agreed on an exchange rate for their shares. Also unusually in this deal, the same advisers worked on both sides of the transaction: Morgan Stanley and Sullivan & Cromwell.