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Musk’s xAI Raises Yield and Extends Deadline on $5B Debt Sale Amid Weak Investor Demand

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Elon Musk’s AI venture, xAI, has extended the deadline and increased the yield on a $5 billion debt offering due to a lackluster response from investors, according to a source familiar with the matter. The commitment deadline was moved from Tuesday to Friday to allow more time for investor participation.

To make the offer more appealing, xAI raised the yield on $3 billion in bonds and a $1 billion term loan from 12% to 12.5%. Additionally, the yield on a second term loan was increased from 700 to 725 basis points above the Secured Overnight Financing Rate (SOFR), with that loan now priced at 96 cents on the dollar.

The move reflects investor concerns over xAI’s unrated status and limited financial transparency, which increases perceived risk. As of Thursday, the average yield on high-yield bonds was 7.6%, according to the ICE BofA High Yield Index—significantly lower than what xAI is offering, signaling its need to compensate for higher investor uncertainty.

If demand remains modest, borrowers like xAI must offer better terms to attract buyers. One portfolio manager who chose not to participate noted that healthy deals are typically oversubscribed multiple times, and the increased yield suggests investor hesitancy.

Morgan Stanley, the lead on the transaction, did not commit to underwriting or backstopping the deal—unlike during Musk’s acquisition of Twitter—making this a “best efforts” transaction. If the offering closes Friday, securities are expected to be distributed to investors by Monday.

Earlier this month, the xAI deal entered the spotlight amid a public exchange between Musk and former U.S. President Donald Trump on social media. Despite Musk’s profile and past financial dealings, this offering has yet to capture strong enthusiasm from the high-yield or leveraged loan markets.

Neither xAI nor Morgan Stanley responded to requests for comment.

Morgan Stanley to Increase Sale of Loans Tied to Musk’s X Amid Strong Demand

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Morgan Stanley, leading a group of banks, is set to increase the sale of loans linked to Elon Musk’s social media platform X, following stronger-than-expected demand from investors, according to Bloomberg News on Tuesday. Initially, the banks had planned to sell around $3 billion in loans, but the revised target now stands at up to $5.5 billion, reflecting investor interest that exceeded expectations.

In November, reports indicated that Musk’s rising political influence and connections to former President Donald Trump played a role in improving prospects for the platform, which helped banks manage the debt sale without incurring heavy losses. Morgan Stanley, along with other financial institutions like Bank of America and Barclays, provided Musk with loans in 2022 to support his $44 billion acquisition of X, formerly known as Twitter.

Typically, banks sell such loans to investors shortly after a deal is finalized, but the process has been more challenging in the case of X. Despite this, the latest demand suggests a more favorable outcome for the banks involved.

Tokyo Metro Shares Surge 45% in Market Debut After $2.3 Billion IPO

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Tokyo Metro (9023.T), Japan’s largest subway operator, saw a 45% jump in its shares during its market debut on Wednesday following the country’s biggest initial public offering (IPO) in six years. The company raised ¥348.6 billion ($2.3 billion) from the IPO, with shares closing at ¥1,739 ($11.43) on the Tokyo Stock Exchange, giving Tokyo Metro a valuation of around ¥1 trillion ($6.6 billion). The IPO was priced at ¥1,200 per share, and the offering was more than 15 times oversubscribed, driven by strong demand due to high dividend yields.

This marks the best IPO performance for a large Japanese company since 2018, when flea market app Mercari surged 77% on its debut. Tokyo Metro’s success reflects investor confidence in the stability and growth of its core business as well as the allure of substantial dividends. Travis Lundy, an analyst at Smartkarma, commented, “It’s a well-known, well-respected and stable business which offered a decently high dividend yield at IPO.” The subway operator expects to pay a dividend of ¥40 per share for the fiscal year ending March 2025, with perks for shareholders, such as noodle shop toppings.

Strong Investor Interest and Tokyo Metro’s Growth

The IPO led to a surge in brokerage account openings, as investors were eager to participate in the offering. At its IPO price, the dividend yield was 3.3%, and though the price surge brought the yield down to 2.3%, it remains competitive with similar companies like Kyushu Railway.

Founded in 1920, Tokyo Metro runs 195 kilometers (120 miles) of subway lines, serving 6.5 million passengers daily. In addition to transportation, the company has interests in real estate and retail, contributing to its overall valuation and appeal to investors. The company’s strong position in Tokyo, one of the world’s largest urban markets, has made it an attractive choice for both institutional and individual investors.

Broader Impact and Japan’s IPO Landscape

This IPO is the largest in Japan since SoftBank Group listed its telecom unit in 2018. The Japanese IPO market has seen $4.9 billion worth of offerings this year, the highest in six years, despite some volatility caused by a surprise interest rate hike and a change in prime minister. Bain Capital’s scrapped IPO of chipmaker Kioxia last month illustrates the mixed sentiment in Japan’s market.

In another notable IPO, Rigaku Holdings, a manufacturer of X-ray testing tools, is expected to debut soon after raising $863 million. Tokyo Metro’s successful debut adds momentum to a market that has seen its benchmark Nikkei index rise 14% year-to-date.