Elon Musk has launched himself into M&A orbit. He closed the biggest deal in history with SpaceX on Monday, coming to an agreement to purchase xAI that values his rocket and satellite enterprise at $1 trillion and his artificial intelligence outfit at $250 billion.
The figures are only reasonable according to absurd terms set by Musk. With the duo on the verge of an early public offering, the terrestrial precedent suggests a premature retreat on Earth.
Both are privately run companies in which Musk maintains voting rights, making the information murky. Reuters stated that SpaceX earned approximately $8 billion in EBITDA on sales as large as $16 billion last week.
Projections should be viewed with caution as Musk has a record of overpromising, but the company expects a greater revenue of over $22 billion by the coming year. Suppose profitability is similar, it would generate $11 billion of EBITDA, which would value the company at an out-of-this-world multiple of 90 times.
Its board executive has already done such a remarkable job, automaker Tesla is trading at a staggering 103 times. An even more indefinable exercise is valuing xAI.
Bloomberg stated that the company posted a third-quarter loss of $1.5 billion on revenues of $107 million. However, the top line increased two times in comparison with the previous three months.
Perpetually, it might keep up this pace, and it would exceed $6 billion this year. Reuters indicated that Anthropic, a genuine front-runner in the realm of AI laboratories, is aiming at sales between $20 billion and $26 billion in 2026. That values its recent 350 billion in the valuation at 15 times revenue.
Therefore, xAI would be approximately $90 billion on the same multiple. Musk explains the reasoning behind the deal as “scaling to make a sentient sun to understand the Universe.”
The conversation of launching data centers into space sounds somewhere between optimistic and delusional. Less optimistic accounts of history are in the past mega-M&A.
Mobile network operator Vodafone acquired Mannesmann in 2000 at a cost of $203 billion, and dot-com-bubble leader AOL moved into a merger with Time Warner in 2001 at a cost of $165 billion. Both were developed on advances of technology that were going to change the world: 3G wireless and the internet.
Vodafone subsequently received several charges, its stock plummeted, and it retrenched. AOL did worse, valuing 99 billion dollars in 2002 and subsequently seeing its merger perform worse.
Musk’s self-referential merger universe, if anything, revolves around even more outlandish expectations. In a letter dated February 2, Elon Musk announced that his artificial intelligence and social networking company xAI had been bought by his rocket and satellite company SpaceX. Reuters reports that the transaction values SpaceX at $1 trillion and xAI at $250 billion.
The letter by Musk lacked financial information. He talked about the company’s plan to build data centers in orbit, saying, “this marks not just the next chapter, but the next book in SpaceX and xAI’s mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!”
Reuters had earlier announced that SpaceX is set to launch an initial public offering later this year. The report indicates that the company has been looking at Bank of America, Goldman Sachs, JPMorgan, and Morgan Stanley to hold top positions on the listing.
The world record of the largest M&A deal is set with the purchase of xAI. Data compiled by LSEG stated that this is a record set before the acquisition by Vodafone of Mannesmann in Germany in a hostile takeover valued at over 203 billion in 2000.
