Elon Musk buys X again! Here is the way Xai Holdings offers investors – the key question to answer

Elon Musk has just won the second social network known as Twitter for three years.

Musk, the world’s richest man, bought his social media platform on March 28 using his artificial intelligence startup XAI in an all-stock deal that values ​​X for $33 billion, excluding debt. The new joint entity will be called XAI Holdings, worth more than $100 billion, again excluding debt, according to Bloomberg News.

The deal is surprising, but not necessarily shocking: Since its inception in 2023, the two businesses have worked closely together, including data licensing and product distribution for XAI’s chatbot Grok. They also share many of the same investors, and in some cases employees even co-working spaces in Palo Alto, California.

Musk said the deal was worth $80 billion, an increase from a valuation of about $50 billion in November, the company’s last time it raised funds from investors. The $33 billion stock value of X in the deal is roughly the same as the valuation in the recently closed financing, and is also close to Musk’s special price in 2022, which also calculates $12 billion in debt.

Musk’s decision to merge his business was a victory for investors X, who suffered more than two years of uncertainty as he abandoned social networks as an advertiser and user. The company has been working to grow its advertising business or to earn meaningful revenue from subscriptions. For most of the time, investor fidelity reduces its equity in X by 60% to 70%.

The combination with XAI means X Investors now owns stake in a nascent artificial intelligence startup with higher room for upside.

Musk posted on X as X announced the deal: “Xai and X’s futures intertwined.” “Today, we officially took a step to combine data, models, computing, distribution and talent. This combination will unlock great potential by blending XAI’s advanced AI capabilities and expertise with X’s huge coverage.”

But the deal also raises many questions, including the most basic question: Is this deal actually necessary? Here are some of the most pressing unknowns about the new arrangement.

Why trade?

This week, Musk and other X or XAI shareholders praised the merger and in a way that the two companies helped each other. People focus primarily on the proprietary datasets XAI owns through X and its billions of user posts. It also allows XAI to fully control the dataset, meaning companies can refuse to license the data to any other AI competitor. Meanwhile, X can help Xai distribute its Grok Chatbot and other products to millions of consumers.

But the problem with this logic is that all these claimed benefits seem to exist. Xai has been using social network data to train Grok for over a year, and Musk has been serving X users to users – and sells advanced versions of the product to X users through its premium subscription. Given Musk’s role running both companies, there should be no reason to worry about any benefits being in trouble, otherwise X suddenly starts working with XAI competitors.

What is the real value of X and XAI?

Musk said the deal is worth $33 billion, excluding $12 billion in debt. He also said it values ​​XAI at $80 billion. This is a deal Musk bought one of his private companies with another of his private companies, both represented by the same bank representative Morgan Stanley. This unique arrangement means that as long as no investors resist, Musk could theoretically distribute any value he wanted to X and XAI.

It’s not a coincidence that Xai bought X for about October 2022, which means XAI bought for it, meaning X investors are simply transferring their shares from one company to another. XAI’s latest valuation before the deal was around $50 billion, but now the company is worth $80 billion, even if there is no new financing involved in the deal. Musk appears to have added value as part of the acquisition.

X’s spokesperson declined to comment on the details of the deal.

Who will run Xai Holdings?

One of the biggest cheerleaders in the deal last week was “The future won’t be brighter.” It’s unclear what the merger means for her future in the company. Musk has not announced any type of company structure for Xai Holdings, and it is not known who will run the new coalition entity, although Musk himself seems to be the most likely option. Yaccarino may continue to run X as a business unit for a new company, but the merger is often confusing and may require significant role changes. We have to wait and see how closely the X and XAI operations are blended to better understand how they operate.

How will this change X’s social networking products?

It is not immediately known how the acquisition will affect X (if any), partly because the two businesses have long been deeply intertwined. For example, Grok can already be used on X, and users can pay extra for advanced features related to AI Chatbot. Over time, it seems that more integrations will likely be made in X, including tools like picture editing or voice assistants. This could still happen despite Musk’s leadership with both business leaders.

Will other social networks be acquired now?

AI companies are eager for all proprietary data sets when training AI systems and looking for ways to differentiate chatbots from competitors. Reddit Inc., for example, has licensed Trove of its user content to Google at Alphabet Inc. and earned hundreds of millions of dollars a year through AI licenses. According to Bloomberg intelligence analyst Mandeep Singh, other AI companies such as OpenAI, Anthropic and Clplexity AI may consider getting other social networks to secure their own unique data sets. Confused does propose solutions to our merger with Tiktok to resolve the services owned by Bytedance Ltd. in the United States.

“We believe that smaller social media players will actively join providers of large language models, which is far beyond the combined market value of Snap, Pinterest and Reddit given the advanced valuation of XAI at $80 billion,” Singh wrote.

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