Elon Musk is raiding his own companies, including SpaceX, Tesla, and Starlink, to rescue xAI, a struggling AI firm. This move comes just weeks before what may become the largest public offering ever.
Key Executive Moves
Some key executives who have made the move to xAI include:
- SpaceX President Gwynne Shotwell, who helps oversee operations
- Longtime Starlink executive Michael Nicolls, who took over as xAI president in April
- SpaceX finance chief Bret Johnsen, who now runs xAI’s books
Impact of xAI on SpaceX IPO
xAI posted a roughly $6.4 billion operating loss last year and burned an estimated $14 billion in cash. This could be a potential liability for the listing, as Starlink doubled operating income to $4.42 billion. However, the xAI drag may not dent the debut due to indexing rules.
The Index Rule That Forces Buying
Once SpaceX lists, a wave of forced buying kicks in. New rules allow huge IPOs to join the Nasdaq 100 just 15 trading days after listing. SpaceX would qualify almost instantly, forcing every fund that tracks the index to buy the stock.
The Retail Floodgates Open
The demand floor builds before pricing day too. Shareholders have approved a 5-for-1 forward split that cut the fair value per share to about $105.32 from $526.59. Reports indicate SpaceX is weighing an allocation of up to 30% of IPO shares to retail investors.
Conclusion
The forced buying guarantees a strong open, but it says nothing about what happens once the passive funds finish loading up and the stock has to trade on fundamentals. Analysts have warned that mega-IPOs often struggle after the debut, and a company valued near $2 trillion with a cash-burning AI unit attached has little room to disappoint.