The bitter public feud between Elon Musk and Donald Trump has raised the political temperature further but that hasn’t stopped Morgan Stanley marketing a $5 billion debt offering for xAI, the artificial intelligence firm launched by Musk.
Details of the debt package, which was reported by Reuters, were revealed amid volatility—both economically and politically—as tensions between the world’s richest man and the President continue to escalate.
According to the report, the financing structure includes a floating-rate term loan B priced at 97 cents on the dollar with a spread of 700 basis points over the Secured Overnight Financing Rate Data (SOFR) benchmark. An alternative fixed-income option is also on the table: a hybrid loan-and-bond package offering a fixed 12% coupon.
Risk-averse structure
What may pique the interest of financial advisors and fixed-income allocators is its structure: Morgan Stanley is not underwriting the full offering or committing capital. Instead, it’s being floated as a “best efforts” deal—an increasingly common posture among banks wary of macroeconomic instability.
The unpredictable nature of the Musk-Trump relationship has been on full show. Just days after calling for the President’s impeachment and blasting his sweeping “One, Big, Beautiful Bill”, Musk was on X supporting the administration’s response to the LA protests. From “bromance” to breakup to what? The future remains uncertain.
Perhaps wary of the impact the two men’s actions and words are having on the economy and markets, Morgan Stanley’s cautious stance echoes the memory of the $13 billion in debt underwritten by Morgan Stanley and others in Musk’s 2022 acquisition of what is now known as X (formerly Twitter). That financing left several institutions holding debt for over two years as rate hikes and platform restructuring delayed investor interest.
Having become a vocal public critic of the White House, Musk has now raised concerns that businesses tied to him, including xAI, could face federal pushbacks in the form of contract cancellations or funding cutbacks. “What has shifted in just a few months is Musk's political leverage,” one insider told Reuters.
Tesla, the company most associated with Musk, has endured a roller coaster in line with its owner's fallout with Trump. According to Barron's, recent conciliatory posts on X resulted in Tesla stock rising Tuesday morning, putting its market value back above $1 trillion. At the height of the pair's war of words last week, shares of the EV maker fell 17% in the space of two days.
All the drama has clearly not put Musk off seeking capital. Beyond the debt market, xAI is simultaneously courting approximately $20 billion in equity financing. Reuters sources suggest valuations range between $120 billion and $200 billion, depending on the prospective investors and market appetite.
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