By Björn Jeffery, SvD Tech Brief. Published in Svenska Dagbladet on 1 April 2025.

When Elon Musk merges companies X and xAI, it is said to be about strategy. It looks more like a way to manage the companies’ — and the billionaire’s own — increasingly troublesome debt burden.

The world’s foremost billionaire is having a tough time right now.

Tesla is falling heavily on the stock exchange and major protests are taking place against both Elon Musk and buyers of his cars. Critics argue that he is devoting too much time to political assignments and too little to his companies.

Storm clouds have gathered in his personal finances too. The world’s richest man is most likely also one of the most heavily leveraged. And now Musk is restructuring his empire in an attempt to secure his position.

The recent announcement was that Musk is merging his companies X and xAI. Given the man’s preference for a particular letter, and the fact that Grok — xAI’s chatbot — is already integrated into X, one might assume the companies were already essentially one. According to Musk himself, the purpose of the deal is to “unlock tremendous potential” by combining the reach of X with the AI capabilities of xAI.

That integration, however, is already happening today. More likely, the deal is about something else entirely: namely Musk’s debt — and more specifically the collateral he holds against it.

Billionaires like Elon Musk are usually rich through their assets, rather than through what is available in their bank account. In Musk’s case it is his shares in companies such as SpaceX and Tesla that have made him the world’s richest person.

But from time to time, real cash is needed to cover day-to-day expenditure or new business acquisitions — such as when he bought Twitter for 44 billion dollars in 2022. The solution is typically to borrow against one’s shares to free up funds, without having to sell anything. In the case of Twitter, subsequently renamed X, the company itself was also leveraged: 12 billion dollars in loans therefore came along with the newly formed acquisition.

A further 25 billion dollars came from Musk himself, largely financed through Tesla share sales in 2022. Half of Musk’s current Tesla shares are pledged as collateral for personal loans of up to around 3.5 billion dollars. There is still headroom for Musk to borrow more against the remaining shares — but after Tesla’s share price has fallen around 30 percent so far this year, the situation has begun to look rather shakier.

One does not need to speculate about the risks of Musk’s Tesla share pledging — the company has itself acknowledged them on several occasions. In a document Tesla submitted to the American financial regulator under the heading “risks related to ownership of our shares,” one can read the following:

“If the price of our common stock were to decline significantly, Mr. Musk could be forced by one or more of the banking institutions to sell shares of Tesla to meet his loan obligations if he cannot do so through other means. Any such sales could cause the price of our common stock to decline further.”

To provide some protection against this outcome, Tesla has a policy that its most senior executives may only pledge 25 percent of their share value. But with a volatile share price, things can move quickly. Hundreds of billions of dollars in market capitalisation have been wiped from Tesla since the start of the year alone.

One might, however, wonder which bank would in practice dare to force a sale of Musk’s shares. He is not merely wealthy — he is also one of the most powerful people in the world.

The X and xAI deal looks more like something driven by Elon Musk’s personal finances than by any corporate strategy. By linking X to his fast-growing AI company, future fundraising becomes considerably simpler, and managing the companies’ and his own personal debt load becomes easier too. Should Tesla’s share price continue to fall, Musk now has a more stable asset to rely on.

Investing in one of Musk’s many companies has previously come with a premium — you get Elon Musk thrown in. That has been a partial explanation for the often high valuations. That premium — for all his companies, and perhaps most of all for Tesla — is now in the process of becoming a cost rather than a benefit for investors. Because there are other shareholders in both X and xAI. They are now being pressed into new corporate combinations backed by weak strategic arguments — for the simple reason that Musk needs to restructure and shore up his own personal finances.