According to sources familiar with the matter, Morgan Stanley is using a different strategy to market the $5 billion debt package for Elon Musk’s xAI compared to past deals.
Morgan Stanley will not underwrite the full amount or use its own capital for the deal, according to the sources. Instead, the offering is structured as a “best efforts” transaction, meaning the final debt size will be determined by investor demand. While this approach is common, it suggests banks are exercising greater caution amid a volatile macroeconomic climate.
Morgan Stanley declined to comment, and xAI has not yet responded to a request for comment.
In 2022, a group of seven banks led by Morgan Stanley committed $13 billion in debt to support Elon Musk’s $44 billion acquisition of X, a high-risk financing move. The deal became a cautionary example, as the banks couldn’t sell the debt for two years.
The banks were only able to sell off that debt earlier this year, after x showed better results in the months before and after the U.S. presidential elections, with more people using the platform.
Investors were also more interested because Elon Musk seemed connected to the political scene, especially around Donald Trump’s return, and because many wanted to invest in artificial intelligence companies.
Besides selling debt, xAI has been discussing plans to raise around $20 billion through equity funding, according to sources familiar with the situation. Two of these sources said the deal would value the company at over $120 billion, while another two mentioned that valuations as high as $200 billion have also been discussed.
At first, Musk confirmed raising funds alongside a potential merger between xAI and the social media platform X, but the plan stopped, according to two sources.
In just a few months, Musk’s influence over Trump has shifted dramatically following a bitter fallout between them. This change has created uncertainty around the future of Musk’s private business, which could face challenges if the federal government decides to cancel contracts or grants connected to them.
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