Elon Musk Faces Scrutiny Over Potential X Valuation Manipulation
The ease with which Elon Musk attempts to influence the valuations of his companies, through public statements or alleged fabricated cases, is drawing attention from judicial authorities on both sides of the Atlantic. French prosecutors have alerted U.S. Authorities to concerns that Musk may have deliberately stoked controversy surrounding deepfakes generated by his AI chatbot, Grok, to artificially inflate the value of X (formerly Twitter) and its parent company, xAI, ahead of a planned IPO.
French Investigation and Allegations
According to Le Monde, the cyber section of the Paris Prosecutor’s Office sent reports to both the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). The reports suggest that the controversy sparked by sexually explicit deepfakes created by Grok may have been deliberately generated to boost the valuation of X and xAI. This occurred at a crucial time, leading up to the planned June 2026 IPO of the new entity formed from the merger of SpaceX and xAI.
Prosecutors examined provocative posts by Musk celebrating Grok’s image generation capabilities, coinciding with a surge in app downloads. This activity is seen as potentially contributing to an increased perception of the companies’ value. The investigation, which began in 2025, has already involved searches of X’s French offices and voluntary hearings with Musk and former CEO Linda Yaccarino.
SpaceX, xAI, and the Upcoming IPO
SpaceX, which controls xAI, and xAI, which controls X, are aiming for a valuation of $1.75 trillion for the future IPO, according to Reuters. The goal is to raise approximately $50 billion, surpassing Saudi Aramco’s record IPO in 2019. SpaceX recorded a turnover of $15-16 billion last year, with a profit of around $8 billion, largely due to Starlink. XAI is currently valued at $250 billion despite revenues of only $210 million and a cash burn of $9.5 billion in the first nine months of 2025.
SEC Lawsuit and Ongoing Legal Battles
This latest scrutiny comes as Elon Musk is also involved in a separate legal matter with the SEC. According to the Supreme Court docket, the case, Elon Musk v. Securities and Exchange Commission (No. 23A342), relates to disclosures concerning his ownership in Twitter in 2022. The SEC is represented by Elizabeth B. Prelogar, Solicitor General, and Elon Musk is represented by Ellyde Roko Thompson of Quinn, Emanuel, Urquhart & Sullivan, LLP.
reports indicate Musk is facing a civil trial for allegedly manipulating Twitter’s stock price prior to his acquisition of the company in 2022.
Settlement Talks
As of March 17, 2026, Elon Musk and the U.S. Securities and Exchange Commission are reportedly in talks to settle the lawsuit accusing him of delaying disclosures related to his Twitter stake.