Key Person Risk
Last week, the rumour mill surrounding Elon Musk and his various companies inspired a post called 3trn Founder Bet.
Today, the FT is reporting that at least some of it is becoming reality:
So xAI, a company that started with a petulant impulse purchase of a social media business, and then pivoted into aggressive AI model building and deployment foundation models, will be acquired by SpaceX, a rocket launching business with a satellite internet service.
The deal puts the combined valuation at $1.25trn, making it Elon’s second trillion-dollar company, which is extraordinary in itself. SpaceX is a compelling business in a unique competitive position and likely would command in the region of $1trn as a standalone business. But xAI is in a street fight that costs billions to play in, and may yet prove to be an anchor around the neck of SpaceX’s formerly clean narrative.
Either way, what’s true is that Elon is the key person of all key people. If anything were to happen to him, it’s more than plausible that we’d see in excess of $1trn of equity value wiped away in an instant. The capital market has never been so levered to a single individual.