Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Elon Musk is, among other things, the king of the related party transaction. Almost a decade ago, Tesla bought SolarCity, a clean energy start-up backed by Musk and his brother. Now, the tech billionaire is merging xAI and X, formerly known as Twitter, in an all-stock deal. This values the former\u2019s equity at $80bn and the latter\u2019s at $33bn, for a combined total of $113bn.\u00a0From an industrial standpoint, crunching these companies together is probably sensible. One may be a mature social network and the other a rocket-ship artificial intelligence start-up. Yet xAI\u2019s Grok chatbot feeds off the social media\u2019s data, and Grok is tirelessly flogged to X users. The huge valuations ascribed to the two companies may have raised eyebrows. But both groups are privately held and tightly controlled. The numbers, in this case, are less informative than those of public companies derived by daily trading with liquidity. And, of course, in all-stock combinations it is the ratio between the two companies\u2019 sizes \u2014 rather than their absolute values \u2014 that is most intriguing. It determines how big a slice of the combined pie each set of shareholders is going to end up with. In this case, xAI\u2019s are getting about 70 per cent, while those in X are getting the remaining 30 per cent. Whether this is equitable is hard to determine. xAI has very little revenue, but apparently lots of promise. It was valued at $45bn a few months ago in the private market, which makes its current $80bn valuation look particularly juicy. It benefits from the excitement the technology is currently generating. Meanwhile, animal spirits at X are frenetic. Banks have recently sold its debt at about face value. That\u2019s a dramatic turnaround compared with the distressed levels it was trading at in late\u00a02024. Musk has also raised fresh equity at roughly the valuation that X is getting in this deal. Annual Ebitda, apparently with heavy adjustments, is just $1.2bn \u2014 about the same as interest payments \u2014 implying an enterprise value of more than 35 times ebitda. That is a lot for a company relying on sluggish ad revenue.\u00a0The two companies have many common shareholders, starting with Musk but including some venture capital investors. Indeed, Musk has given investors who backed his acquisition of Twitter a quarter of xAI\u2019s shares. Should the exchange ratio turn out to be lopsided, at least they will have been on both sides of the deal. Investors in only one of the two companies will be looking at relative ownerships more closely to weigh the value creation or destruction. With both xAI and X suffering from serious grade inflation, the way the pie has been sliced may, by happenstance, just may make sense, even if the absolute pegged sizes do not. And, anyway, Musk controls both companies and almost certainly gets the final say. sujeet.indap@ft.com<\/p>\n","protected":false},"excerpt":{"rendered":"
Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Elon Musk is, among other things, the king of the related party transaction. Almost a decade ago, Tesla bought SolarCity, a clean energy start-up backed by<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[63],"tags":[],"class_list":{"0":"post-259326","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-tech"},"_links":{"self":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts\/259326","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/comments?post=259326"}],"version-history":[{"count":0,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/posts\/259326\/revisions"}],"wp:attachment":[{"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/media?parent=259326"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/categories?post=259326"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/globetimeline.com\/ar\/wp-json\/wp\/v2\/tags?post=259326"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}