Billionaire investor Elon Musk has sold his social media platform X to his AI startup xAI, sparking controversy

The transfer of ownership of X to xAI on March 28 means that the class-action lawsuit against Musk — accusing him of defrauding former Twitter shareholders by delaying the disclosure of his initial investment in the social media platform — has become “a whole lot spicer,” Cinneamhain Ventures partner Adam Cochran said in a March 28 X post.

Billionaire investor Elon Musk has sold his social media platform X to his AI startup xAI, sparking controversy as it coincides with a US judge rejecting his bid to dismiss a lawsuit tied to the social media platform.

The transfer of ownership of X to xAI on March 28, which comes after a judge refused to dismiss a class-action lawsuit against Musk, has made "the whole lot spicer," Cinneamhain Ventures partner Adam Cochran said in a March 28 X post.

On the same day that Musk said "xAI has acquired X in an all-stock transaction," a US judge reportedly rejected Musk's attempt to dismiss the lawsuit, which accuses him of defrauding former Twitter shareholders.

According to a report by Bloomberg, the complaint filed in December 2, 2023, in a federal court in New York, aims to hold Musk personally liable for allegedly delaying the disclosure of his initial investment in the social media platform.

The lawsuit aims to combine several suits filed in lower courts by former Twitter shareholders, who claim they suffered losses due to Musk's actions.

The complaint alleges that Musk's posts on March 24, 2022, announcing his investment in Twitter and his potential acquisition of the company, significantly impacted the company's stock price.

However, the complaint asserts that Musk's disclosures regarding his investment were "incomplete and misleading." It claims that Musk's statement about acquiring Twitter for a lower price if his investment was not disclosed early enough is "an outlandish threat to extort better terms of acquisition."

The complaint further alleges that Musk's announcement of completing the acquisition at a price of $54.20 per share was "false and misleading."

It adds that the billionaire aimed to deceive shareholders into selling their shares at a lower price than the $54.20 at which Musk planned to acquire the shares.

The lawsuit also mentions that Musk's actions caused material harm to shareholder plaintiffs, who allegedly suffered significant economic losses.

"The complaint is a whole lot spicer today as it’s opened up his AI entity to exposure here too, and it’s a much bigger pie," Cochran noted.

Musk said the deal values xAI at $80 billion and X at $33 billion, factoring in $12 billion in debt from the $45 billion valuation.

He originally bought X, formerly known as Twitter, for about $44 billion in April 2022.

"xAI and X's futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent," Musk announced.

"This combination will unlock immense potential by blending xAI's advanced AI capability and expertise with X's massive reach, users and user engagement, to create something truly groundbreaking."

However, Cochran claimed that "Musk used his pumped-up xAI stock to pay multiple times over value for X, but still take an $11B loss on the transaction."

He said that Musk is "screwing over xAI investors, and X investors."

The crypto developer added that the move was executed to sell user data to xAI.

xAI is best known for its AI chatbot "Grok," which is integrated into the X platform. When Musk released it in November 2023, he asserted that it could outperform OpenAI's first iteration of ChatGPT in several academic tests.

Musk explained at the time that the motivation behind building Grok was to create AI tools equipped to assist humanity by empowering research and innovation.

While Cochran stated that Grok's valuation at $80 billion is an "insanely dumb valuation," crypto developer "Keef" expressed disagreement.

Keef said, "This is shady all around, but given the day, Grok is genuinely probably the top model for various tasks."