Musk’s xAI Lures Investors To $5-B Debt Deal

Elon Musk’s artificial intelligence (AI) startup xAI Corp. lured enough investors to its $5 billion debt deal by offering sweeter pricing.

The company responsible for the AI chatbot Grok needs the new money because it is burning through cash so quickly to fuel its growth.

Morgan Stanley wrapped up commitments for the package, which included a mix of bonds and loans, with higher interest rates and a bigger discount on one component, Gowri Gurumurthy and Rachel Graf reported for Bloomberg News.

The offering presented an opportunity for investors to gain exposure to AI and Musk’s empire. However, his feud with U.S. President Donald Trump and concerns about xAI’s financials led investors to demand better terms.

Aside from the pricing changes, the company said it also planned to raise $4.3 billion in equity as a balance sheet cushion and changed some terms on debt documents to make them more investor-friendly.

The company responsible for the AI chatbot Grok needs the new money because it is burning through cash so quickly to fuel its growth.

The $3 billion of new bonds priced at a 12.5% yield, as did a $1 billion fixed-rate term loan, according to a person familiar with the matter.

A separate $1 billion loan has a coupon 7.25 percentage points over the benchmark, priced at a discounted 96 cents on the dollar. When the debt package launched on June 2, it garnered demand in excess of $3.5 billion by the end of that day, with TPG Angelo Gordon pledging itself as an anchor investor.

Interest waned as Musk publicly sparred with Trump and investors reviewed xAI’s financials. Commitments were originally due on Tuesday, but Morgan Stanley extended the time frame, Jeannine Amodeo also reported for Bloomberg News.