X.AI’s debt continued its weekslong slide after Linda Yaccarino, the CEO of social media site X Corp, announced today she is stepping down from the company after a two-year stint. She did not provide a reason for her resignation.
Shortly after Elon Musk’s $44 billion acquisition of then-Twitter, X in 2023 hired Yaccarino, formerly the chair of global advertising and partnerships at NBCUniversal, to entice advertisers to return to the platform.
Advertising, which accounted for roughly 90% of X’s revenue prior to being taken private, plummeted after companies paused spending on the platform, reportedly due to concerns around content moderation and broader uncertainty around Musk’s leadership.
These issues erupted once more over the past week when X.AI’s chatbot Grok made numerous posts containing anti-Semitic and other explicit content, at one point calling itself “MechaHitler” and, in a separate scenario, writing a rape fantasy targeting an X user.
LCD asked Grok to weigh in on the falling prices of X.AI debt and whether the recent controversies have been a factor. Grok responded: “The high initial yields (12-12.5%) and modest demand (1.5x oversubscription) already signaled skepticism, and the posts may exacerbate this.”
On July 8, Grok’s account on X posted that the company is “actively working to remove the inappropriate posts” and that X.AI is banning hate speech “before Grok posts on X.”
As LCD previously reported, some investors balked at X.AI’s recently closed bond sale because of a lack of transparency around the company’s financials and corporate structure. X.AI reported a $341 million EBITDA loss in Q1, then acquired X Corp in March to leverage the social media site’s vast data to develop its AI technologies, including Grok.
X.AI’s term loans have had a tepid response in the secondary market since being issued last month. The $1 billion fixed term loan, which had a 12.5% coupon at par, was marked at 96.625/97.625 on July 9, down from 98/99 on July 8, while its $1 billion term loan B, which finalized pricing at S+725 with an OID of 96, was at 90.75/91.75 on July 9, down from 92.75/93.75 on July 8.
Similarly, the company’s 12.5% secured bonds due 2030 dropped by around three points, to roughly 95.5 on July 9, according to MarketAxess. Those bonds had priced above par when they first hit the secondary market.
Featured image: NurPhoto/NurPhoto via Getty Images
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