Tesla shares rise 6.5%, Musk says to cut back DOGE work
FILE PHOTO: The Tesla logo is seen on a car at the Paris Games Week (PGW), a trade fair for video games in Paris, France, October 27, 2024. REUTERS/Sarah Meyssonnier/File Photo
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The Star
an hour ago
- The Star
Morgan Stanley markets $5 billion for Elon Musk-owned xAI in loans, bonds, sources say
FILE PHOTO: xAI logo is seen in this illustration taken, February 16, 2025. REUTERS/Dado Ruvic/Illustration/File Photo NEW YORK (Reuters) -Morgan Stanley is marketing a $5 billion package of bonds and two loans on behalf of billionaire Elon Musk-owned xAI, at the same time as a falling out between the world's richest man and the U.S. president plays out in public, sources familiar with the matter told Reuters. As of last week, the bank started discussing a floating-rate term loan B at 97 cents on the dollar with a variable interest rate of 700 basis points (bps) over the SOFR benchmark rate, one person familiar with the matter said. It is offering a second option, loan and bonds at a fixed rate of 12%, the person familiar added. The terms are preliminary and will depend on investor demand, according to the source. Morgan Stanley held a meeting with investors last week in which some financials of the company were shared. Morgan Stanley is taking a different approach in marketing the $5 billion debt for Musk's xAi from previous transactions, sources familiar with the matter told Reuters. Morgan Stanley will not guarantee the issue volume or commit its own capital to the deal, the sources said. The 'best efforts' transaction, which means the size of the debt will depend on investor interest, is not an uncommon practice but shows banks are probably being more prudent lending in an uncertain macro environment. The people spoke on condition of anonymity because the discussions with investors are not public. Morgan Stanley declined to comment, while xAI did not immediately respond to a request for comment. Banks were also likely choosing this approach to avoid putting themselves in a similar spot to when they committed to give $13 billion of debt to Musk to finance his $44 billion acquisition of X in 2022 and could not get out of that position for two years. The X financing is considered one of the boldest bets by seven banks led by Morgan Stanley who committed $13 billion in debt to the $44 billion acquisition by Elon Musk in October 2022. Soon after the deal to buy Twitter, as X was called at the time, the Federal Reserve began raising U.S. interest rates and Musk started restructuring the company. Banks typically sell such loans to investors soon after the deal is done, but in the case of X, they were stuck holding it for over two years. They could only dispose of that debt earlier this year capitalizing on X's improved operating performance over the previous two quarters as traffic on the platform rose before and after the U.S. presidential elections. Musk's role in U.S. President Donald Trump's return to office and public displays of his closeness to the most powerful position in the world also boosted interest for the debt from investors jockeying for some influential link to a new regime, as well as a surge in investor interest for exposure to artificial intelligence companies. Apart from selling debt, xAI has also been in talks to raise about $20 billion in equity funding, according to people familiar with the matter. Two of the people added the deal would value the company at more than $120 billion, while the other two people said figures as high as $200 billion had been discussed. Musk initially explored raising funds in parallel with a merger of xAI and social media platform X, but that plan did not move forward, two of the people said. What has changed in just the space of a few months is Musk's political sway over Trump after an acrimonious schism erupted between the two. That has cast a cloud over the future of the businesses owned by the world's richest man, which though private could be hurt if the federal government chooses to cancel contracts or grants to them. It has also heightened the risk of demand being reduced for any money that will be raised or investors asking for a higher risk premium on the new debt. (Reporting by Matt Tracy, Echo Wang and Tatiana Bautzer in New York, Dawn Chmielewski in Los AngelesEditing by Shri Navaratnam)
The Star
2 hours ago
- The Star
From allies to enemies: the cost of a Musk-Trump split
WASHINGTON: The bitter clash between Elon Musk and Donald Trump has drawn a spotlight on the South African-born tycoon's businesses. Here is a look at his affairs as their White House partnership turns toxic, with billions of dollars in market value and government contracts hanging in the balance. Tesla The Tesla car company is the cornerstone of Musk's business empire and has suffered considerably since the entrepreneur dove into politics. The electric vehicle giant's stock has plummeted more than 20% since the start of the year, reflecting investor anxiety about Musk's increasingly polarising public persona. The damage reached a fever pitch on Thursday when the Musk-Trump feud erupted out in the open. In a matter of hours, Tesla shed more than US$150bil (RM635bil) in market capitalisation, wiping US$34bil (RM144bil) from Musk's personal fortune. The alliance with Trump was supposed to have been Tesla's golden ticket, even if the administration was going to scrap tax credits that had helped it become an automobile juggernaut. More importantly, Musk could count on Trump's blessing for his ultimate vision: putting fully autonomous vehicles on American roads. This ambition has been stymied by government regulation over the years, with authorities slowing efforts due to worries that the technology is not ready to hit the road at mass scale. The Trump administration was expected to lift these regulatory constraints – a promise now in serious jeopardy. "Musk needs Trump because of the regulatory environment, and you can't have Trump go from friend to foe," said analyst Dan Ives of Wedbush Securities. The administration also regulates vehicle design and would influence the mass production of robotaxis that Musk intends to launch in a pilot program in Austin, Texas, this month. Musk's hard-right political pivot has alienated the very customers Tesla needs most: environmentally conscious and liberal-leaning buyers who once saw the brand as aligned with their values. Some drivers have resorted to bumper stickers declaring their cars were purchased "before Elon went crazy." The damage is showing up in sales figures. In Europe, while overall electric vehicle sales climbed, Tesla's market share crashed 50% in April as attention focused on Musk's political activities and the company's aging product lineup. A recent Morgan Stanley survey said 85% of investors believe Musk's political involvement is actively harming Tesla's business. SpaceX A prolonged battle with Trump poses existential risks for SpaceX, Musk's space exploration company that has become NASA's most critical partner. SpaceX and NASA are deeply interdependent. SpaceX depends on government contracts worth tens of billions of dollars, while NASA relies on SpaceX for everything from astronaut transportation to satellite deployment. SpaceX's portfolio includes some of the most sensitive national security projects: launching astronauts to the International Space Station, building spy satellites and operating the Starlink satellite network. The financial windfall has been enormous, with a December share sale valuing SpaceX at US$350bil (RM1.5 trillion) – US$140bil (RM592.3bil) more than just six months earlier, largely due to anticipated government largesse under Trump. In the heat of the clash on Thursday, Trump threatened to cut off all government contracts, while Musk said he would mothball the Dragon spacecraft, which is vital for ferrying astronauts to and from the International Space Station – though he later walked back this threat. xAI Musk has huge plans for his xAI artificial intelligence company. He's angling to compete with OpenAI, the ChatGPT-maker that was co-founded by Musk a decade ago and is now steered by his archrival Sam Altman. Altman has his own inroads to the White House, where he signed a massive AI infrastructure initiative called the Stargate Project, which recently expanded to Saudi Arabia and Abu Dhabi. Initially dismissing Stargate as unrealistic, Musk later worked behind the scenes to undermine the project, reportedly telling investors that Trump wouldn't approve any expansion that excluded xAI. Adding another layer of complexity, Musk folded X (formerly Twitter) into xAI earlier this year. Musk's US$44bil (RM186.14bil) acquisition in 2022 transformed the site into the go-to platform for conservatives, but Trump himself remains an infrequent user, preferring his own Truth Social platform for communication. – AFP
Free Malaysia Today
3 hours ago
- Free Malaysia Today
Trump to keep Starlink at White House despite break with Musk
President Donald Trump said he had no plans to cut off Starlink, despite announcing his relationship with Elon Musk was over. (EPA Images pic) WASHINGTON : President Donald Trump said on Monday he has no plans to discontinue Starlink at the White House but might move his Tesla off-site, following his announcement over the weekend that his relationship with Elon Musk, the billionaire CEO of both companies, was over. 'I may move the Tesla around a little bit, but I don't think we'll be doing that with Starlink. It's a good service,' Trump told reporters, referring to the satellite internet company that provides high-speed broadband access. It is a unit of Musk's SpaceX. In March, Trump said he had purchased a red Tesla Model S from Musk, Trump's then-close ally. Last week, a White House official said Trump might get rid of it after a public feud erupted between the two men. The Tesla was seen parked at the White House over the weekend. On Saturday, Trump said he had no intention of repairing ties with Musk. On Monday, the president said he would not have a problem if Musk called. 'We had a good relationship, and I just wish him well,' Trump said. Musk responded with a heart emoji to a video on X showing Trump's remarks. Last week, Trump and Musk exchanged a flurry of insults after the world's richest man denounced Trump's tax and spending bill as a 'disgusting abomination.' Musk's opposition has complicated Republican efforts to pass Trump's 'big, beautiful bill' in congress, where the party holds slim majorities in the house of representatives and senate. Since the dispute began last Thursday, Musk has deleted some social media posts critical of Trump, including one signalling support for impeaching the president. Sources close to Musk said his anger has started to subside, and they believe he may want to repair his relationship with Trump.
