it doesn't invalidate anything; my original point was that Musk has this much money, meaning that he's just moving money around, meaning that this pretentious analogy is not actually making any kind of insightful point whatsoever. what Musk is doing is taking two entities already with a high market value and then merging them, he's not just deciding randomly that 2 irrelevant things have value. how much money this guy has is irrelevant. it's just a shitty attempt at satire, which I cannot stand
The acquisition is entirely in stock. Shareholders of X are receiving xAI stock in exchange for their X shares. They don't get any cash.
Musk says the new combined entity is worth $80B, but that's on paper. The company certainly doesn't have that much cash or liquid assets. The valuation is based on xAI's previous funding round + whatever number they decided to assign to the X assets + the magic of "synergy" produced by this deal. In other words, it's not based on anything real. (Accountants call this "goodwill.")
right but those entities quite clearly have an existing market value in the region of those numbers. this guy's arms and legs do not. it's a poor analogy that's trying to be too clever
Maybe the guy is pretty good at basketball and sincerely thinks he’s going to be the best player in the world next year? That would make his arms and legs awfully valuable.
Musk’s xAI is in a similar place. It’s an also-ran in a crowded space and it’s not making any money while spending billions. But the founder certainly has great faith in it. Is $80B the right value to assign to that faith? Who knows.
X is "clearly" worth only $10 billion less than what Musk paid for Twitter back 2022? Really? Despite its revenue being 50% lower than it was back then?
As for xAI, Anthropic has a valuation of ~$60 billion. So again not that "clear". Of course they don't have Musk's political connections which might end up mattering quite a bit (of course there's also the risk of Musk being prosecuted in 4 years as well...)
that's not how market values work and there's no such thing as a "true market value". my car has a market value, it not being for sale right now does not change that.
Your car is presumably not unique. Both the model and well... it probably does more or less exactly the same as any other car. If you had an entirely unique one of a kind antique car it would be pretty different.
Estimating "true market value" of companies whose valuation is almost entirely based on their potential long-term growth isn't particularly straightforward until you find a buyer willing to buy a significant or it does an IPO.