Morgan Stanley markets $5b debt deal for Musk's xAI

Morgan Stanley is offering a US$5 billion package of bonds and loans for Elon Musk’s AI company, xAI, according to sources.

The package includes a floating-rate term loan B priced at 97 cents on the dollar, with a variable interest rate of 700 basis points over SOFR.

Another option includes loans and bonds at a fixed 12% interest rate.

The deal uses a “best efforts” approach, meaning the final amount will depend on investor demand.

Morgan Stanley will not commit its own capital or guarantee the issue volume, signaling caution amid economic uncertainty.

This marks a shift from the bank’s role in Musk’s US$44 billion acquisition of X (formerly Twitter) in 2022.

Meanwhile, xAI is also in talks to raise US$20 billion in equity funding, potentially valuing the company between US$120 billion and US$200 billion.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Musk’s financing patterns show evolution from government dependence to private market reliance

This xAI debt offering represents a significant shift in Musk’s historical funding approach, which previously relied heavily on government support.

Between 2010-2015, Musk’s early empire was fueled by approximately $4.9 billion in government subsidies across Tesla, SpaceX, and SolarCity, including a crucial $465 million Department of Energy loan for Tesla 1.

During Tesla’s precarious early days in 2010, Musk personally “ran out of cash” and relied on loans from friends while the company was down to its last $9 million, demonstrating how close his ventures came to collapse without external support 2.

The current private market financing for xAI reflects Musk’s transition from government dependency to leveraging his established track record and private investor relationships, though the higher interest rates (12% fixed) reflect both current market conditions and perceived risk.

This evolution mirrors the trajectory of his earlier ventures, which initially required substantial public support before achieving independent commercial viability.