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Stock Markets February 5, 2026

SpaceX to Acquire xAI Using Triangular Merger, Preserves xAI as Subsidiary

Deal structure shields SpaceX from liabilities and may provide tax benefits while aiming for a public offering to fund orbital data centers

By Caleb Monroe
SpaceX to Acquire xAI Using Triangular Merger, Preserves xAI as Subsidiary

SpaceX will absorb xAI through a triangular merger that keeps xAI as a wholly owned subsidiary, a structure that limits SpaceX’s direct exposure to xAI liabilities and can deliver tax advantages to shareholders. The combined company, valued at $1.25 trillion, aims to go public later this year to support plans for deploying data centers in space. The arrangement also allows the new entity to avoid repaying billions in debt, according to sources cited in reporting.

Key Points

  • The acquisition will be structured as a triangular merger, keeping xAI as a wholly owned subsidiary of SpaceX.
  • The combined company is valued at $1.25 trillion and the deal structure reportedly allows avoidance of repaying billions in debt while providing tax advantages to shareholders.
  • The merged entity plans to go public later this year to raise funds for deploying data centers in space; xAI operates social platform X and developed the Grok chatbot.

SpaceX’s planned acquisition of xAI will be executed as a triangular merger, a corporate structure that leaves xAI intact as a wholly owned subsidiary of SpaceX rather than fully folding the operations into a single corporate entity.

According to sources familiar with the transaction, the approach offers several strategic benefits. It can shield SpaceX from direct legal exposure tied to xAI while conferring tax advantages to shareholders of the combined organization. The combined company is valued at $1.25 trillion.

One consequence of the triangular merger is that the combined organization will be able to avoid repaying billions in debt, the sources said. Maintaining xAI as a separate, wholly owned subsidiary rather than merging it completely into SpaceX is a common corporate tactic used to segregate legal and financial responsibilities between entities within a larger corporate group.

The move comes amid legal scrutiny related to xAI’s Grok chatbot, which has been linked to allegations that it propagated sexualized deep-fake images of real women and children. Those issues are the subject of recent European investigations, and the merger structure is reported to help insulate SpaceX from potential liabilities tied to those inquiries.

xAI operates the social media platform X and developed the Grok chatbot. The platform announced last month that it has implemented measures intended to prevent Grok from "allowing the editing of images of real people in revealing clothing" and stated that it remains committed to keeping X a safe platform.

In the Monday announcement, the companies said the merged entity plans to pursue a public listing later this year. The stated purpose of going public is to raise capital to support the acquisition’s stated long-term objective: financing the deployment of data centers in space.

Stakeholders should note that the transaction’s structure, the ongoing European investigations related to Grok, and the reliance on a planned public offering to fund space-based data center plans are central elements of the deal as reported by the sources.

Risks

  • Ongoing European investigations into allegations that Grok disseminated sexualized deep-fake images of real women and children pose legal and regulatory uncertainty for the combined entity - impacts technology, social media, and legal sectors.
  • The triangular merger is designed to insulate SpaceX from xAI liabilities and to avoid repaying billions in debt, which may raise creditor, regulatory, or reputational scrutiny in financial and corporate governance areas - impacts finance and corporate sectors.
  • The financing strategy depends on a planned public offering later this year to fund space-based data centers, introducing execution risk tied to capital markets conditions - impacts aerospace, infrastructure financing, and public markets.

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