Acting before the largest IPO in history, Tesla is approved to invest in SpaceX through xAI.

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With a single regulatory document, Tesla has formally established its position in the reshuffling of Elon Musk’s business empire, seizing the opportunity before SpaceX may set the record for the largest IPO fundraising, and, via investment in xAI, acquiring shares in SpaceX.

An FTC (Federal Trade Commission) filing dated Wednesday, March 11, shows Tesla has received approval, and the US government has permitted the company to convert its investment in xAI into a small equity stake in SpaceX. This move formalizes the financial connection between Musk’s two core businesses at a key juncture as SpaceX prepares to go public.

On Thursday, March 12 (Eastern Time), media sources cited insiders saying that this equity conversion is directly linked to Tesla’s previously announced $2 billion xAI investment, corresponding to less than a 1% stake in SpaceX.

The same FTC filing also shows Musk is selling SpaceX equity to investors such as Valor Equity Partners and DFJ Growth. Although filings are mandatory for transactions exceeding $133.9 million, the document does not disclose the exact quantity of shares involved. Neither Tesla, SpaceX, nor Musk have commented on the matter.

Tesla's Bet on xAI: From Investment to Integration

At the end of January this year, Tesla announced during its Q4 results that it would invest about $2 billion in Musk’s AI startup xAI, participating in xAI’s latest financing round via preferred shares, and signing a “framework agreement” to strengthen ties and enhance Tesla’s ability to deploy AI products and services in the real world.

Matt Maley, chief market strategist at Miller Tabak + Co., commented at the time that this investment is exactly the signal bullish Tesla investors wanted to see—“If Tesla is to outperform as bulls expect, it will be thanks to the robotaxi and robotics business.”

Subsequently, xAI and SpaceX announced a merger in February this year, with the combined entity valued at $1.25 trillion. Previously, xAI had incorporated the social media platform X (formerly Twitter) into its portfolio. Musk acquired Twitter in 2022, renamed it X, and later merged it into xAI at a $33 billion valuation. The merger between xAI and SpaceX directly triggered the conversion of Tesla’s $2 billion investment into SpaceX equity.

SpaceX Once Studied Merger With Tesla or xAI

According to reports from January this year, SpaceX was exploring the feasibility of merging with Tesla, with some investors actively pushing for it; meanwhile, SpaceX was also considering merging with xAI. After the news broke, Tesla's stock price rose up to 5.6% in a single day.

Insiders said any potential deal could attract massive participation from infrastructure funds and Middle Eastern sovereign investors, but no final decision had been made, and the parties might choose to remain independent. With the SpaceX-xAI merger now realized, the direct Tesla-SpaceX merger route has, for now, resulted in only a limited financial linkage via this equity conversion.

SpaceX IPO: Largest Ever Listing Imminent

This Tesla share conversion comes amid SpaceX’s aggressive preparations for an IPO.

According to reports, SpaceX is planning to list as early as June this year, with a fundraising goal of up to $50 billion and a target valuation exceeding $1.75 trillion, potentially surpassing the $29.4 billion IPO fundraising record set by Saudi Aramco in 2019 to become the largest IPO ever. Bank of America, Goldman Sachs, JPMorgan, and Morgan Stanley are expected to be the lead underwriters for the offering.

However, SpaceX’s completion of the xAI all-stock acquisition ahead of the IPO has caused concern among some investors.

xAI’s monthly cash burn of about $1 billion, mainly for AI infrastructure, somewhat dilutes the appeal of SpaceX’s core asset—the satellite internet service Starlink—for public market investors. Critics believe that if SpaceX is categorized as a loosely structured conglomerate, its valuation may fall below expectations.

For Tesla, this equity conversion means its balance sheet will formally reflect SpaceX’s IPO prospects, and investors betting on the electric car company's shift toward AI and autonomous driving will now also have a stake linked to the aerospace business.

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