When Elon Musk finally closed on his deal to acquire Twitter, it seemed like the tech mogul may have bitten off more than he could chew. After all, over the course of 2022, Musk had offered to take the social media giant private; tried to back out of that proposal amid financial pressures; and ultimately been forced to move forward with the purchase anyway by the Delaware Chancery Court.
He wasn’t the only one caught up in the brouhaha, either. Of the $44 billion transaction, an estimated $10 billion came in the form of equity put up by outside investors, including both preexisting shareholders rolling over their stakes and new ones eager to get on board with Musk’s latest enterprise.
But the consensus in the wake of the deal—that Musk overpaid for the site, which he’s since renamed X, while also dragging his friends and associates into a stinker of an acquisition—no longer seems to hold true, reports Bloomberg, which recently set out to calculate where the backers’ investments now stand.
The upshot? Name-brand investors such as Larry Ellison, Bill Ackman (by way of his charitable foundation), and Andreessen Horowitz have by this point seen a nearly 200% return on their investment.
Yet X is hardly the sociopolitical powerhouse it once was, with short-form video continuing to eat the internet and users alienated by Musk’s right-wing politics fleeing the platform—so how did Musk ensure his backers came out looking good anyways?
Bloomberg chalks it up to some savvy M&A, reporting that X shareholders now own a cumulative 5% of another Musk venture—the frothy rocket startup SpaceX—which will be worth $100 billion if the firm goes public at a rumored $2 trillion valuation in its upcoming, and much-heralded, initial public offering. (Reuters pegged the expected IPO valuation at $1.75 trillion this morning [May 15], although even that amount would make it the biggest stock market debut by an American company ever.)
SpaceX owns X and xAI, Musk’s artificial intelligence company, following a merger this February that reportedly valued xAI at $125 billion and SpaceX at $1 trillion. The SpaceX IPO would let X shareholders cash out their shares and see a return on those early investments.
“The same people own all of Elon’s companies,” explained Ross Gerber, CEO of the investment firm Gerber Kawasaki, in a statement to Bloomberg. Other shareholders in the platform have included Saudi prince Alwaleed bin Talal, Sean “Diddy” Combs, and Jack Dorsey.
Last year, Musk merged X with xAI—the machine learning startup behind his chatbot Grok, which was trained on Twitter’s massive logs of user content—in a deal that Bloomberg reports valued xAI at $80 billion and X itself at just over $40 billion.
It was a boon to investors who’d been disappointed in X’s performance following Musk’s acquisition of the platform, says Gerber: “I had marked down the position like 75%, and I got to mark it back up.”
Still, says Gerber—who estimates that the SpaceX listing will ultimately net him a 2.5 or 3 times return on his X stake—all of Musk’s financial engineering does leave other investors holding the bag: “The fact that essentially SpaceX got heavily diluted so that Elon could make whole his Twitter and xAI investors kind of just sucks for SpaceX.”
—Brian Contreras, Staff Writer
This article originally appeared on Fast Company’s sister website, Inc.com.
Inc. is the voice of the American entrepreneur. We inspire, inform, and document the most fascinating people in business: the risk-takers, the innovators, and the ultra-driven go-getters that represent the most dynamic force in the American economy.