Morgan Stanley Markets $5 Billion for Elon Musk’s xAI!
Morgan Stanley is working on a $5 billion debt deal for Elon Musk’s AI startup, xAI. The package includes bonds and two types of loans. One is a floating-rate term loan B, priced at 97 cents on the dollar.
This loan has a variable rate of 700 basis points above the SOFR benchmark. The other option offers a fixed interest rate of 12%.
These terms are still being discussed and may change based on investor interest. Morgan Stanley recently met with investors to present xAI’s financial details.
A Different Approach from Morgan Stanley
Unlike previous deals, Morgan Stanley is not putting its own money into this one. It’s using a “best efforts” approach. This strategy suggests that banks are being more cautious, especially given the current uncertain market conditions. The timing is also notable. The deal comes while Elon Musk is publicly clashing with the President.
At the same time, xAI is reportedly seeking $20 billion in equity funding. Some reports suggest its valuation could reach as high as $200 billion.
Morgan Stanley markets $5 billion in debt as part of a broader effort to fuel xAI’s next phase of growth.
Morgan Stanley Markets $5 Billion for xAI Amid Investor Caution
Morgan Stanley markets $5 billion in new debt for Elon Musk’s xAI while keeping investor talks private. People familiar with the matter shared details anonymously, as the discussions were not public. Morgan Stanley chose not to comment. xAI also hasn’t responded to media requests.
This cautious approach is likely shaped by experience. In 2022, Morgan Stanley and six other banks backed Musk’s $44 billion purchase of Twitter—now known as X. They committed $13 billion in debt but were unable to offload it for two years due to market shifts and rising interest rates.
Past Deals Influence New Strategy
The Twitter deal was one of the boldest bank moves in recent years. Soon after the acquisition, interest rates climbed, and Musk began cutting costs at X. That debt became a burden for the lenders, which they are now trying to avoid repeating.
Earlier this year, Musk explored raising funds through a merger between xAI and X. But the idea didn’t move forward, according to two sources.
There’s now another twist: Musk’s recent public split with Donald Trump. The fallout has weakened Musk’s influence in political circles. This could lead to new risks for his companies, especially if the federal government decides to withdraw contracts or grants.
These developments may also impact the current fundraising efforts. Investors may hesitate or request higher returns due to the increased risk. As Morgan Stanley markets $5 billion in loans and bonds, it faces a more cautious financial landscape than just a few years ago.