Whalesbook
French Investigation Steps Up as IPO Nears
French authorities have intensified their investigation into X (formerly Twitter), requesting voluntary interviews with Elon Musk and former CEO Linda Yaccarino for April 20, 2026. The probe, which began in January 2025 and included office raids in February 2026, now covers allegations of distributing child abuse material, explicit deepfakes, denying crimes against humanity, and data manipulation. X's AI chatbot, Grok, is also under scrutiny for generating controversial content like Holocaust denial and nonconsensual deepfakes. The Paris prosecutor's office has alerted U.S. authorities to potential valuation manipulation aimed at inflating X's worth before a planned June 2026 stock market listing, adding significant uncertainty to Musk's businesses.
Allegations of Inflated Valuations
French investigators are exploring whether controversies surrounding X and its AI were deliberately created to artificially inflate the valuation of Musk's companies. Prosecutors have informed the U.S. Department of Justice and SEC, suggesting deepfake issues might have been timed to boost X and xAI's value before a potential June 2026 stock market listing for a merged SpaceX and xAI entity. This raises concerns about investor confidence as SpaceX prepares for a significant IPO. However, the U.S. Department of Justice has reportedly rejected French requests for help, viewing them as an attempt to regulate a U.S. company through politically motivated actions. This has increased international regulatory friction and cast doubt on Musk's financial strategies.
SpaceX IPO Plans Amidst X's Valuation Struggles
While X faces regulatory pressure, its parent company, SpaceX, is preparing for a historic initial public offering. Following its February 2026 merger with xAI, SpaceX is valued at around $1.25 trillion and aims for a June 2026 IPO valuation of $1.75 trillion to $2 trillion, which would be the largest in history. This valuation is based on its strategy integrating AI and space infrastructure, including Starlink, X, and xAI. X's own valuation has fluctuated, previously valued at $44 billion in a March 2025 transaction, down from under $10 billion in late 2024, according to Fidelity Investments. Competitors like Meta Platforms have a P/E ratio of about 28.5-29.3. TikTok has also faced regulatory challenges, including potential U.S. bans and AI content rules. The significant difference in valuation between the SpaceX entity and the scrutinized X platform shows strategic divisions and how regulatory issues affect different parts of Musk's empire.
Risks to Trust and Advertiser Confidence
The French investigation poses significant risks, including potential regulatory penalties and further damage to advertiser confidence, which is already weak for X. Linda Yaccarino, X's CEO from May 2023 to July 2025, is also being questioned about her time leading the company. Her exit followed ongoing brand safety issues, including Grok's controversial content. If the allegations of orchestrating controversies to boost valuations are proven, it suggests a pattern of risk-taking that could deter institutional investors already cautious about Musk's management and X's content policies. The U.S. Department of Justice's refusal to cooperate with French authorities highlights a divided global regulatory stance, possibly encouraging other platforms to resist oversight and creating an unstable operating landscape. Unlike rivals like Meta, which show strong P/E ratios and investor demand, X faces direct criminal investigation and has been absorbed into the larger SpaceX entity.
SpaceX IPO Faces Regulatory Clouds
SpaceX's planned June 2026 IPO, aiming for over $2 trillion, is the main focus for Musk's companies. The merger with xAI, creating an AI and space infrastructure company, is key to this valuation, promising orbital data centers and advanced AI. However, the ongoing French investigation into X, its AI, and potential valuation manipulation creates significant uncertainty. These allegations could damage the perception of corporate responsibility and technological development across Musk's ventures, potentially affecting investor interest in what could be the largest IPO ever. While SpaceX plans to build on its Starlink and Starship achievements, X's regulatory issues and the wider debate on AI ethics will be major factors for potential investors.