The X/xAI Shell Game: When Musk Merges With Himself

In what might be the most perfectly on-brand Elon Musk move yet, at the end of March on a Friday evening, Elon Musk suddenly declared that xAI, his AI company that was always connected at the hip with X (which we’d been calling ExTwitter to avoid confusion), was officially “acquiring” X at a valuation of $33 billion (or, actually, $45 billion minus the $12 billion debt).

Many people likely reacted by saying, “Wait, they weren’t the same company, already?” And that’s a fair question, given how intertwined they’ve been. But no, they were technically separate companies. Just ones that shared the same majority shareholder, as well as apparently employees who would move from one to the other, and at times access to technology that Tesla supposedly bought. Oh, and also, technically X owned some of xAI’s shares. (The fact that X owned some of xAI’s shares — initially 25% but apparently diluted down to 12% at the time of Musk’s announcement — just adds another layer of circularity to this corporate ouroboros.)

This “merger” represents something of a perfect capstone to Musk’s evolving relationship with traditional corporate governance. Where most companies at least maintain the pretense of following standard M&A procedures, Musk has essentially decided that even the appearance of proper process is unnecessary. It’s just too much hassle.

Of course, the second question once you understand this is… “huh?” And it’s a good question. After all, most of the investors in Musk’s boondoggle with ExTwitter had pretty much given up hope that the investment would ever be worth any actual money.

The best writeup of the deal comes from William Cohan at Puck, who asks all the good questions:

Did anyone know X was for sale? Was the company shopped around before deciding to sell out to xAI? Were any bankers hired to value the two companies and set an exchange ratio? Yes, the two companies are private and majority-owned by Elon, but there are plenty of minority investors at each company. Were they consulted? Was anyone looking out for their interests?

Also, on the governance front, were there special committees of the boards of directors set up to evaluate the deal and make sure it was fair to the non-Elon shareholders? Supposedly, Morgan Stanley represented both companies in the deal. (Morgan Stanley was also the lead advisor to Elon when he bought X in October 2022, and was the lead underwriter on the $13 billion of X debt.)

The conflicts here are almost comically perfect. In a normal merger, you’d have independent boards, fairness opinions, maybe even competing bids. The acquiring company would hire one investment bank, the target would hire another, and they’d duke it out over valuation. But here? Morgan Stanley is representing both sides while also being the lead debt holder on the original Twitter acquisition. It’s like having the same lawyer represent both the plaintiff and defendant while also being the judge.

But that’s actually the point. This isn’t really an M&A deal in any traditional sense. It’s more like a corporate shell game where Musk is moving his disappointed Twitter investors into the frothy world of AI by basically saying “look over here at this shiny new valuation!” The traditional guardrails of corporate governance — you know, those pesky things designed to protect minority shareholders — are treated as less than afterthoughts, rather than actual rules.

The valuations. The split. The permissions. The conflicts of interest. None of it matters. The creditors and the equity holders in ExTwitter aren’t going to complain because they’re better off now. The investors in xAI likely aren’t really complaining either because even though they likely just got shafted in overpaying for a toxic asset, they just ponied up for another chunk of Elon’s johnny-come-lately AI plan, and if someone’s investing in anything Elon-related now, they’re likely true believers that Elon can do no wrong.

Matt Levine’s conclusion is also correct:

Nobody cares. Musk has absolute control of (1) xAI, (2) X and (3) US government regulators. If he wants to smush X and xAI together, no one will complain, and it doesn’t mean anything. Surely Musk isn’t required to file forms or get regulatory approvals anymore. He is not required to abide by merger best practices or zealously protect the interests of minority shareholders, in part because all his companies have left Delaware, but in larger part because none of the shareholders of his private companies complain about anything he does. If you are giving money to a private Musk venture, it’s because you trust Musk to make decisions, not because you care about corporate formalities.

X/xAI is the largest M&A deal so far in 2025 in the sense that it values X at, you know, 33/80 of the value of xAI, and Musk announced that xAI is worth $80 billion, and all of that is reasonably plausible though not clearly validated by arm’s-length transactions with economically motivated counterparties. xAI last raised money in December at a $51 billion valuation; it was reportedly looking to raise more at a $75 billion valuation last month. X raised money at a $33 billion equity valuation earlier this month, but (1) some of that money came from Musk and (2) I wonder if this deal was already in the works at the time? In hindsight, X’s funding round looks a little like it might have been designed to validate a merger price.

In any case, it’s barely an M&A deal? Two companies that were owned by the same person (and some slightly non-overlapping friends) and shared employees and data and revenue and, you know, a name, are now one company. They were informally one company before, and they are formally one company now, and no money changed hands. It feels like a silly technicality to call this a big M&A deal.

Yeah. This is a unique… I hesitate to call it a “deal”… announcement. What makes it particularly notable is how it represents a sort of end-stage evolution of Silicon Valley’s already loose relationship with corporate governance. Earlier tech companies at least maintained the pretense of following standard M&A procedures. Here, Musk has essentially decided that even the appearance of proper process is unnecessary, because it’s really too much of a hassle.

In a normal world, this move likely benefits those who bet on ExTwitter and substantially harms some of the investors in xAI by diminishing the supposed value of their equity, but it’s all made up funny money anyway at this point. And that’s perhaps the most telling aspect of this entire situation: in an ecosystem where valuations are increasingly divorced from reality, where “funding secured” has become a punchline rather than a legal standard, and where the traditional rules of corporate finance seem optional, Musk has simply taken these trends to their logical conclusion.

The math here is particularly telling: xAI, barely two years old, is supposedly worth $80 billion because… well, because AI is hot and Musk says so. X/Twitter, which actually has users and revenue (though massively less of both than when Musk bought it), is worth $33 billion because… that’s a number that makes the deal work. None of these numbers mean anything in any traditional sense, but that’s kind of the point.

The genius of this deal, if you want to call it that, is how it solves multiple problems at once. The X/Twitter investors get to pretend their investment isn’t underwater by trading it for shares in a shiny AI company. The xAI investors get to pretend their inflated valuation makes sense because look, they just did a real big boy merger at that price. Musk gets to pretend he didn’t destroy tens of billions in value at Twitter because now it’s part of a bigger, more valuable company. Morgan Stanley gets to pretend its original Twitter debt might actually be worth something. Everyone gets to pretend!

And that’s really what makes this the perfect deal for 2025. In an era where corporate finance has become increasingly performative — where valuations are more meme than math, where conflicts of interest are features rather than bugs, and where traditional corporate governance is for the little people — Musk hasn’t so much broken the system as shown us its logical conclusion.

The financial world used to at least maintain the pretense that numbers meant something, that process mattered, that rules existed for a reason. But why bother with all that when you can just… not? When you can have the same bank advise both sides of a deal while holding the debt, announce whatever valuation makes your story work, and treat corporate governance like an optional DLC pack that you’ve chosen not to purchase?

It’s like the perfect “deal” for the Trump/Musk administration.

Welcome to the era where corporate finance is just another form of shitposting.