Technology

After what were surely some very intense negotiations with himself, Elon Musk has decided to merge his rocket company SpaceX with his AI and social-media company xAI in what amounts to a $1.25 trillion tie-up. Combining two of his companies into a new mega-corp supposedly worth more than the sum of its overvalued parts is a classic Musk move. His last self-merging coup came last year when he combined X and xAI. Along with frequent capital raises, Musk’s vertically integrated takeovers of his own properties allow him to continue to pump up the values of his start-ups. In December, SpaceX was valued at $800 billion. Less than two months later, for the purposes of this deal, it was valued at $1 trillion, with xAI considered to be worth $250 billion.

SpaceX sealed the deal by issuing $250 billion in new shares that it handed to xAI’s shareholders. The move effectively diluted the holdings of existing SpaceX shareholders. The New York Times summed up the parlous bargain: “SpaceX’s longtime backers were forced to shrink their ownership in the company drastically, as a percentage, to pay for the acquisition.”

That would infuriate most investors, but thanks to the circular nature of Musk’s corporate economy—otherwise known as the Muskonomy—and his frequent reliance on the same group of financiers, some of SpaceX’s investors were already xAI investors. (SpaceX is also expected to raise at least $50 billion in a public offering this summer.) Minting new SpaceX shares is supposed to buoy the entire enterprise while saving Musk the trouble of pursuing more conventional ownership models that involve real dollars.