Elon Musk’s X to xAI Transfer: A Spicy Twist in the Fraud Lawsuit?

The recent transfer of Elon Musk’s social media platform, X, to his AI startup, xAI, has added a significant layer of complexity to an already contentious fraud lawsuit. This all-stock deal, finalized on March 28th, comes on the heels of a US judge’s rejection of Musk’s motion to dismiss the lawsuit, prompting widespread speculation and analysis.

The class-action lawsuit alleges that Musk defrauded former Twitter shareholders by delaying disclosure of his initial investment in the platform. This pivotal transfer of ownership, as highlighted by Cinneamhain Ventures partner Adam Cochran in a March 28th X post (link), has significantly escalated the stakes. Cochran aptly described the situation as \”a whole lot spicer.\”

Increased Exposure for xAI?

The timing of the acquisition, coinciding with the judge’s decision (link), raises concerns about increased legal exposure for xAI. Cochran suggests that this exposes xAI to a significantly larger financial risk, describing it as \”a much bigger pie.\”

Musk himself announced the deal, valuing xAI at $80 billion and X at $33 billion, considering the $12 billion debt from its $45 billion valuation. This contrasts sharply with his original $44 billion acquisition of X in April 2022.

Musk’s statement emphasizes the synergistic potential between xAI and X, aiming to combine data, models, computing power, distribution, and talent. He envisions building a platform that \”doesn’t just reflect the world but actively accelerates human progress.\”

However, Cochran casts doubt on the valuation, suggesting Musk overpaid for X while simultaneously incurring an $11 billion loss. He alleges that this transaction disadvantages both xAI and X investors, potentially involving the sale of user data to xAI.

Related: Elon Musk’s ‘government efficiency’ team turns its sights to SEC — Report

xAI’s flagship product, the AI chatbot Grok, integrated into X, has fueled further debate. While Musk boasts its superiority over ChatGPT (link), opinions diverge on the $80 billion valuation, with some considering it excessively high. Despite the controversy, others defend Grok’s capabilities.

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