Through a regulatory document, Tesla has officially established its position in the restructuring of Elon Musk's business empire, leveraging its investment in xAI to hold shares in SpaceX ahead of what could be a record-setting IPO fundraising for SpaceX.
The U.S. Federal Trade Commission (FTC) filing dated March 11, this Wednesday, shows that Tesla has received approval from the U.S. government to convert its investment in xAI into a small equity stake in SpaceX. This move formalizes the financial connection between Musk's two core businesses at a critical window for SpaceX's IPO preparations.
On Thursday, March 12, Eastern Time, media reports citing informed sources stated that this equity conversion is directly related to Tesla's previously announced investment of approximately $2 billion in xAI, corresponding to Tesla's ownership stake of less than 1% in SpaceX.
The aforementioned FTC document also indicates that Musk is selling SpaceX equity to investors such as Valor Equity Partners and DFJ Growth. While the filing mandates disclosure for transactions exceeding $133.9 million, it did not disclose the specific scale of the holdings. Tesla, SpaceX, and Musk have not commented on this matter.
<h2>Tesla's Bet on xAI: From Investment to Integration</h2>
At the end of January this year, Tesla announced during its fourth-quarter earnings release that it would invest approximately $2 billion in Musk's artificial intelligence startup xAI, participating in xAI's latest funding round in the form of preferred shares and signing a &#34;framework agreement&#34; to strengthen the relationship between the two and enhance Tesla's ability to deploy AI products and services in the real world.
Matt Maley, Chief Market Strategist at Miller Tabak + Co., stated at the time that this investment was the signal bullish Tesla investors were hoping to see—&#34;If Tesla can perform as well as the bulls expect, it will rely on the robotaxi and robotics business.&#34;
Subsequently, xAI and SpaceX announced a merger in February this year, with the merged entity valued at $1.25 trillion. xAI had previously incorporated the social media platform X, formerly known as Twitter, under its umbrella. After acquiring Twitter in 2022, Musk renamed it X and subsequently integrated it into xAI at a valuation of $33 billion. The merger between xAI and SpaceX was the direct trigger for converting Tesla's $2 billion investment into SpaceX equity.
<h2>SpaceX Previously Reported to Explore Merger with Tesla or xAI</h2>
According to reports from January this year, SpaceX was exploring the feasibility of merging with Tesla at that time, with some investors actively pushing in that direction; meanwhile, SpaceX was also researching the possibility of merging with xAI. Following the announcement, Tesla's stock price saw a single-day increase of up to 5.6%.
Informed sources indicated that any potential transaction could attract significant participation from infrastructure funds and sovereign investors from the Middle East, but no final decision had been made, and all parties might choose to maintain independent operations. With the merger between SpaceX and xAI taking precedence, the direction of a direct merger between Tesla and SpaceX has now achieved a more limited financial connection through this equity conversion
<h2>SpaceX IPO: The Largest IPO in History is Imminent</h2>
The recent shareholding conversion by Tesla occurs against the backdrop of SpaceX actively preparing for its IPO.
According to reports, SpaceX plans to go public as early as June this year, with a fundraising target of up to $50 billion and a target valuation exceeding $1.75 trillion, potentially surpassing the $29.4 billion IPO fundraising record set by Saudi Aramco in 2019, making it the largest IPO in history. Bank of America, Goldman Sachs, JP Morgan, and Morgan Stanley are expected to play key underwriting roles in this issuance.
However, SpaceX's full stock acquisition of xAI before the IPO has raised concerns among some investors.
xAI's monthly cash burn of approximately $1 billion is primarily used for AI infrastructure development, which somewhat dilutes the appeal of SpaceX's core asset—satellite internet service Starlink—to public market investors. Critics argue that if SpaceX is characterized as a loosely structured diversified group, its valuation may fall short of expectations.
For Tesla, this shareholding conversion means that its balance sheet will officially incorporate SpaceX's IPO prospects, adding an additional layer of exposure linked to the aerospace business for investors betting on the electric vehicle company's transition to AI and autonomous driving

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Media reports indicate that this equity conversion is directly related to Tesla's previously announced investment of approximately $2 billion in xAI, corresponding to Tesla's ownership stake of less than 1% in SpaceX

- Tesla has officially established its position in Elon Musk's business restructuring by converting its investment in xAI into a small equity stake in SpaceX.  
- As of March 11, the FTC has approved this conversion, formalizing the financial relationship between Tesla and SpaceX amid the latter's preparations for a potential IPO, aiming to raise up to $50 billion.  
- The conversion is linked to Tesla's prior $2 billion investment in xAI, which has raised concerns among investors regarding SpaceX’s valuation and financial stability ahead of its historic market debut.

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Acting ahead of the largest IPO in history, Tesla is approved to invest in xAI and hold shares in SpaceX