Top investors who suffered painful losses backing Elon Musk’s takeover of Twitter are now in line for a sweet consolation prize — in the form of a boost to shares in Musk’s artificial intelligence startup, according to a report.
Musk has offered a 25% stake in xAI, which Musk founded last year, to investors who financed X’s $44 billion acquisition of social media platform X, formerly known as Twitter, in 2022, sources with knowledge of the talks told Financial. times.
XAI closes a $5 billion fundraising round on Wednesday — doubling the company’s value to $50 billion in just six months, the paper said.
Backers of Musk’s takeover of Twitter — who saw advertisers and users fleeing the lack of content regulation — are sitting on billions of dollars worth of unrealized losses. But xAI’s gains will help them recoup their unprofitable investments.
Fidelity, Oracle co-founder Larry Ellison, Saudi Prince Alwaleed bin Talal, Twitter founder Jack Dorsey and venture firms Sequoia Capital and Andreessen Horowitz are among the investors benefiting from Musk’s holdings.
The unique “rewards” system is the latest way Musk is tying together his companies, which include rocket manufacturer SpaceX and electric vehicle maker Tesla.
Many of the investors who funded Musk’s purchase of Twitter justified it as an investment not in X, but in Musk himself.
“There are certain sayings in technology that really stick,” an investor in one of Musk’s companies told the Financial Times. “Never bet against Elon.”
The billionaire’s AI startup is growing fast and will raise about $11 billion in total investments after closing this week’s funding round — a welcome development for Twitter investors, with Musk bringing in about $7 billion in acquisitions.
“It’s difficult to manage conflicts of interest in these kinds of things,” an investor in one firm told the Financial Times. “You have to be a confidant, you’re on both sides.”
In May, xAI closed a $6 billion fundraising round to give it a $24 billion valuation. Some of the backers of Musk’s Twitter purchase include Andreessen Horowitz, Sequoia Capital, Prince Alwaleed and Fidelity, which put up large investments in the startup.
In its latest fundraising round, Musk only allowed previous xAI backers to make new investments, several people close to the matter told the Financial Times.
Musk’s influence has only grown over the past year as he has become a close confidant of President-elect Donald Trump. Musk, the world’s richest man with a net worth of $324.2 billion according to Forbes, has poured more than $100 million into the Trump campaign through pro-Trump PACs, rallying for the candidate in swing states.
Since Trump’s victory, Musk has remained nearby, meeting with Trump allies and Cabinet wannabes at the president-elect’s Mar-a-Lago home. According to Trump’s granddaughter, he also achieved “uncle status.”
Musk’s influence over Trump was evident when the president-elect chose Musk’s pitch to start a government efficiency department — and hired a tech addict to lead it. Trump’s pick for Treasury secretary — “routine” Scott Besant, as Musk called him — shows the billionaire doesn’t always get his way.
Since Musk acquired the platform and renamed it X, the social media platform’s value has declined.
Advertisers left the platform after racist and antisemitic posts grew alongside their paid ads, and after Musk endorsed an anti-Semitic post.
Left-leaning celebrities have said “goodbye” to their millions of X followers, and Musk has turned to rivals like Bluesky or Threads with calls for better regulation of the platform.
Banks including Morgan Stanley and Barclays are currently sitting on $13 billion worth of Twitter debt, and Fidelity has written down its X investment by nearly 80% to a valuation of $9.4 billion, according to the report.
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