Elon Musk's xAI is close to securing a $9.3 billion equity and debt deal. This financial injection aims to bolster the company's artificial intelligence development efforts. Morgan Stanley is marketing a $5 billion debt offering comprising bonds and loans. One option includes a floating-rate term loan at 97 cents on the dollar, with a variable interest rate of 700 basis points over the SOFR benchmark. Another option features fixed-rate loans and bonds at 12%, contingent on investor demand.
xAI is also reportedly in discussions to raise $20 billion in equity, potentially valuing the company between $120 billion and $200 billion. The debt offering is structured as a "best efforts" transaction, meaning the final debt size depends on investor appetite. Morgan Stanley is not guaranteeing the issue volume or committing its own capital, a shift from previous Musk-related deals. This cautious approach follows lessons learned from the 2022 acquisition of X, where banks held substantial debt for an extended period.
Despite market uncertainties, investors show confidence in xAI's potential, driven by the rapid growth in the AI sector. The company's financial strategy positions it to be a key player in the AI revolution, blending innovation with market opportunities. This funding round reflects strong investor interest in xAI's vision and its potential to shape the future of artificial intelligence.
