BAILOUT REQUIRED

Well, the Elon Musk situation at X is

getting weirder and weirder by the day.

Now, Elon Musk is U-turning on what his

team was saying about creator

monetization, probably because it got a

lot of backlash and a lot of scared text

messages from venture capitalists

investing in XAI. But now, the

information is reporting even more scary

news about what's going on with X. We're

going to talk about it now. First, I

want to bring this up. Yesterday in my

video, Xcancelling pay out of money. I

uh in the video, I talked about how XAI

is using apparently, according to Alex

Spyro, which is Elon Musk's attorney,

they're using PWC audits, and I talked

in my video about how PWC audits are not

PCAOB audits. PCAOB actually sanctions

PWC because their audits are crap.

Now, somebody and I pinned the comment.

Somebody wrote here, "As a CPA, I

believe you when you say PWC audits are

lacking in quality." Yep. They certainly

know about disclosures, but audit

procedures.

Yikes. Somebody else goes, "Hiring PWC

to do an audit is like taking out a loan

on a BMW. It's all for looks." Oh,

yikes. So, this is why I I made that

clarification yesterday. I'm like, we

actually use a PCAOBA auditor for House

Act, like IPO grade auditing, cuz it's

like, no, no, no, we got to do a really

great job here. So, yesterday we were

like, is X running out of money? We were

setting up like all this like sudden

funding with SpaceX and Elon's like, oh,

those loans are fake news. And then it

turns out he's taking out debt. People

like, hm. Which then sort of beg the

question like, all right, well, maybe

it's all fake news. Maybe they're not

actually running out of money, right?

And then Elon this morning is like, "No,

no, we're actually not out of money

because we don't want to pay creators.

We're actually underpaying creators. We

should be paying creators more." And so

Elon Musk is trying to puff up this idea

that no, we're not broke. We actually

have lots of money. Which I mean, I hate

to say it, but that's exactly what, you

know, Sam Bankman Freed said. Like,

we're not broke, we got lots of money.

It's like, all right. So, so then it's

like, all right, well, maybe it's all

fake news. you know, maybe Elon isn't

actually going broke with XAI. And then

there's this report that came out, which

maybe it's all FUD and fake news. We

don't know, right? But then there's this

report that comes out, XAI's unusual

deal making to fund Elon Musk's Colossus

2.

And this is really interesting because

here you've got a story about what debts

Elon's actually paying here. Are you

ready for this? This is crazy. So, first

of all, XAI's funding arrangement now

where Elon Musk is bragging about

wanting to buy half a million Nvidia

chips. Apparently, they can't actually

afford to buy the Nvidia chips per the

information. Instead, they are going to

utilize a special purpose vehicle put

together by Valor Equity Partners. And

Valor Equity Partners is going to help

put together a $20 billion leasing

vehicle so XAI can lease Nvidia chips.

But Valor Equity Partners, now this is a

really interesting one. Okay, understand

this. Valor Equity Partners. Let's write

this down so it's nice and clear. Valor

Equity Partners.

Okay, Valor Equity Partners

organizing $20 billion lease deal to

XAI, but they're also

invested in XAI

and

uh one of the operators at Valor is an

exec at XAI. So you got like this sort

of like circular bailout where it's

like, "Oh yeah, Valor will set up a

lease for XAI because XAI can't actually

afford to buy all of the chips and

that'll help protect our investment."

And yeah, we're insiders, so we kind of

realize like how crappy the financial

situation at XAI is. Now, why that's

interesting is because of the terms of

the actual leasing that are going on. So

the terms of the actual leasing kind of

scary as well as the debts. First of

all, the debt package that XAI is

raising has a 12.5%

interest rate. That's insane. That's

like worse than a a personal loan or a

BNPL loan. This is crazy. 12.5% interest

rate. Then listen to this. The special

purpose vehicle is composed of 7.5

billion in equity anchored by Valor and

12.5 billion in debt. Nvidia is

contributing 2 billion. Fine. And we

know that that's the $20 billion raise

we talked about yesterday. But we

thought that Elon was going to use the

money to actually buy the chips. Turns

out that's wrong. The special purpose

vehicle will actually be renting the

chips to XAI for several years which

will then have the option of purchasing

the chips. So it's a lease option is

what it actually is. Now Valor is a

venture capital firm and they've had a

lot of involvement with funding for Elon

Musk. the chief investment officer at

Valor sits on the board also at SpaceX.

So you see the Valor guy sits on the

board at SpaceX. The rumor is you've got

other executives inside of um XAI who

are also VC bros that are connected with

all this. That is a little less clear.

That's a little looser. So it could be

wrong. But this is interesting. The

specialurpose vehicle is only going to

be paying for the chips, not any of the

infrastructure, but using the

specialurpose vehicle saves XAI from

having to put up the cash upfront. So,

it basically reduces the cash outlay

today, but potentially makes the chips

much more expensive in the future should

Elon want to eventually buy them. The

problem is Elon's company is basically

out of money to buy these 550,000 chips

or million chips or whatever because he

keeps saying different things. So now

Valor being an investor in XAI

potentially puts the firm in an awkward

position if XAI can't make its lease

payments. is if XAI can't make its lease

payments, then Valor needs to collect on

that default, but then it potentially

makes XAI the the investment in XAI look

really bad. Now, what's fascinating to

indicate the risk of this because

obviously everything could be fine if

everything keeps going fine. The problem

though is this. This is where people are

wondering like we've already got a 12.5%

interest rate, which is really expensive

on some of the debt. But then listen to

this. The deal also contains

significantly more equity, almost 40% of

the total than a typical data center

deal. So Meta, for example, raised 3

billion in equity and 26 billion in

debt. 3 divided by 29 is 10.3%

equity today. So basically for every

three, you know, for every $1, they

basically were able to take on like $9

of debt. That's crazy. But that's Meta,

which people don't think is going to go

bankrupt. So Meta, for every $1, they

get nine in debt.

Musk,

he has to put up $7.5

to get 12.5 in debt,

which basically means for every buck

you're putting up, you're not getting

anywhere near as much. You're getting

like 1.4, four $1.5

out for every dollar you put up in debt.

Not as ideal for Elon Musk. And that's

because people say XAI is burning too

much cash, which is why these rumors

started circulating about X not being

able to afford monetization considering

getting rid of the monetization program.

And then of course Elon probably got

blown up with a bunch of texts of people

going, "Wait, are you guys out of money?

Like this sounds really bad." And you

know, oh no, no, we're actually

underpaying creators. That's that's why

there's talk about this. if we actually

want to pay them more. Now, what I

wouldn't be surprised by is Elon Musk

pulls something like, "Hey, we're going

to pause payouts to creators while we

come out with a better system.

Meanwhile, they'll just never come out

with a better system, maybe." But a lot

of this doesn't sound good for XAI. And

then, of course, this is the

information. So, maybe it's all wrong.

Like, maybe it's all just like clickbait

fugazi and it's all wrong. And maybe

there are no financial problems at XAI.

But when you factor in that Elon Musk

has maybe not the best auditors at XAI,

his family office is running the

financials at XAI.

You have complaints about the

monetization program, which could be

related to an affordability issue. The

interest rate you're paying at XAI is

12.5% which is nosebleleed. And you're

only able to take out debt when you put

40% down when Meta is able to put 10%

down. And that's from your friendly VC

firm.

Some would suggest that the financial

problems at XAI may be substantially

worse than we presume. Which then makes

you wonder as a Tesla shareholder,

should you be approving this deal to

invest in XAI? Now, we were talking

about this a little bit in the um meet

Kevin community chat yesterday because

we have a new uh community forum here

and uh you know we were talking about uh

this this idea about you know what if

Elon doesn't get the investment in XAI

is he going to potentially start dumping

Tesla shares? These are the kind of

conversations that we like to have in

the meet Kevin membership you know along

with for example calling the top in MP

material. Knock on freaking wood. That

was great. We on MP material we were

looking at 100 as where MP material

would go. We ended up triple rejecting

100 and we're like we was going down

boys. It's down over 15% almost 16%

right now. That was a call in the meet

membership. If you're not part of of

that yet make sure you join over at

meetc.com. Yeah lifetime access and it

could be taxdeductible as well. But

consider for a moment all of these

things together, they create some

serious risk factors for XAI but also

Tesla because think about what you end

up getting. So the Tesla proposal, Tesla

shareholder vote proposal. Let's go

ahead and grab it.

Uh so

here we go.

Take a peek at this. Tesla shareholders

will soon vote on whether to let the

electric vehicle maker invest in XAI's

uh startup. Now, keep in mind usually

like not like any investor can buy

Tesla. So, by swiping up on Robin Hood

and buying Tesla stock, you could

indirectly then get exposure to XAI, but

XAI doesn't have the financial

transparency that Tesla does. So you

actually sort of blur that financial

transparency that's required at XAI and

potentially allows for more funding at

XAI from retail investors by approving

this. In the latest proxy statement

along with the 10-year pay package worth

up to a trillion dollars, there's a

proposal from Stephven Hawk from

Florida, a shareholder with a $2,000

stake in the com company, saying Tesla's

integration of Grock into its vehicle

demonstrates the tangible benefits of

collaboration with XAI. Mind you, you

could literally just plug in GPT or

anything through Bluetooth, frankly.

like this isn't that big of a deal, but

whatever. Tesla's pivot towards AIdriven

technology, including FSD. I mean, that

was never a pivot. Tesla was always a

proponent of FSD. Robotics, we'll see.

Blah blah blah blah blah. Okay. Uh, this

is his little statement. Fine. And there

is now a potential vote to allow

shareholders to invest in XAI. If Tesla

doesn't end up does end up investing in

XAI would be the second of Musk's

companies to do so. SpaceX already put

$2 billion in probably because they

couldn't fully fund it unfortunately. So

had to sort of reach over to complete

the funding round. But anyway, some

Tesla shareholders have argued that XAI

is a rival to Tesla. No, I don't think

so. Hawk's proposal comes as Tesla grips

with weakening EV sales. This is true.

Uh, and Musk obviously wants more of a

controlling stake in Tesla, blah blah

blah. But an investor noted that XAI

could help Tesla reach its market cap

goals

because of excitement around XAI and

Tesla together is going to move Tesla's

valuation higher. Right? Excitement is

going to make the value of the stock go

up. not earnings, not fundamentals, not

performance metrics of XAI relative to

Grock or sorry, relative to OpenAI,

which outperforms Grock on a revenue

basis by 20x and Anthropic outperforms

them by like 10 to 15x. None of that is

actually going to matter. It's just

excitement that matters. This seems

bubbly, man.

I don't know, man. I don't love that at

all. I I don't like it. You know, I'm

tempted to vote

solely against this XAI purchase because

all it does is create a cloud of risk

for Tesla that you're throwing good

money after bad. We should be throwing

good money, the billions of dollars that

you're going to throw into XAI to go

burn on Nvidia leases. You should be

throwing at making a cheaper model that

you promised. And then when Reuters

said, "Oh, the the cheaper model was

cancelled." You said it was fake news.

And then a few months later, we're all

like, "Yeah, no. The cheaper model's

cancelled." Come on, man.

I don't know. I don't know. I don't like

it. Uh, keep them separate, man. I don't

like it at all.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Pra there, financial analyst and

YouTuber. Meet Kevin. Always great to

get your take.