Act Before History's Largest IPO, Tesla Granted Permission to Invest in xAI Holdings in SpaceX

Through a regulatory document, Tesla officially establishes its position in Elon Musk’s business restructuring, just before SpaceX potentially sets a new IPO fundraising record. Tesla acquires SpaceX shares through an investment in xAI.

According to a filing with the U.S. Federal Trade Commission (FTC) on March 11, Wednesday, the company has received approval from the U.S. government to convert its investment in xAI into a small stake in SpaceX. This move formalizes the financial link between Musk’s two core businesses, coinciding with SpaceX’s critical IPO preparation window.

On Thursday, March 12, Eastern Time, media reports citing sources said that this equity conversion is directly related to Tesla’s previously announced approximately $2 billion investment in xAI, representing less than 1% of SpaceX’s shares.

The FTC filing also shows that Musk is selling shares of SpaceX to investors such as Valor Equity Partners and DFJ Growth. While the filings are mandatory for transactions exceeding $133.9 million, the specific shareholding amounts are not disclosed. Tesla, SpaceX, and Musk have not commented on this matter.

Tesla Bets on xAI: From Investment to Integration

At the end of January this year, Tesla announced during its Q4 earnings release that it would invest about $2 billion in Musk’s AI startup xAI, participating in its latest funding round through preferred shares, and signed a “framework agreement” with xAI to strengthen their relationship and enhance Tesla’s ability to deploy AI products and services in the real world.

Matt Maley, Chief Market Strategist at Miller Tabak + Co., said at the time that this investment signals optimism for Tesla—“If Tesla performs as bullish investors expect, it will rely on robotaxi and robot businesses.”

Subsequently, in February, xAI and SpaceX announced a merger, with the combined entity valued at $1.25 trillion. xAI had previously incorporated the social media platform X, formerly Twitter, into its portfolio. After Musk acquired Twitter in 2022 and renamed it X, he valued it at $33 billion and integrated it into xAI. The merger of xAI and SpaceX was the direct trigger for converting Tesla’s $2 billion investment into SpaceX shares.

SpaceX Rumored to Explore Mergers with Tesla or xAI

According to reports from January, SpaceX was already exploring the feasibility of merging with Tesla, with some investors actively promoting this direction; at the same time, SpaceX was also studying the possibility of merging with xAI. After the news broke, Tesla’s stock price surged by up to 5.6% in a single day.

Sources indicated that any potential deal could attract large-scale participation from infrastructure funds and Middle Eastern sovereign investors, but no final decision had been made, and parties might choose to remain independent. With the merger of SpaceX and xAI taking precedence, the direct financial link between Tesla and SpaceX has been limited through this equity conversion.

SpaceX IPO: The Largest Listing in History Approaching

This share conversion by Tesla occurs amid SpaceX’s active preparations for an IPO.

Reports suggest SpaceX plans to go public as early as June this year, with a fundraising target of up to $50 billion and a valuation exceeding $1.75 trillion, potentially surpassing Saudi Aramco’s 2019 IPO record of $29.4 billion, making it the largest IPO in history. U.S. banks, Goldman Sachs, JPMorgan Chase, and Morgan Stanley are expected to serve as lead underwriters.

However, SpaceX’s full acquisition of xAI’s stock before going public has raised concerns among some investors.

xAI’s monthly cash burn of about $1 billion, mainly for AI infrastructure development, somewhat dilutes the attractiveness of SpaceX’s core asset—Starlink satellite internet service—to public market investors. Critics argue that if SpaceX is viewed as a loosely structured diversified conglomerate, its valuation might fall below expectations.

For Tesla, this share conversion means its balance sheet will officially incorporate SpaceX’s IPO prospects. Investors’ bets on Tesla’s transition to AI and autonomous driving now also carry an additional exposure linked to space ventures.