In a sensational corporate development, SpaceX is set to purchase AI software developer Cursor, catapulting the startup’s valuation to an astonishing $60 billion. This dramatic upswing poses a striking example of how assets once undervalued through the FTX bankruptcy proceedings have surged. Initially, FTX and Alameda Research, its trading wing, had secured a modest stake in Cursor—a move that now underscores the profound shifts in the bankruptcy estate’s asset value.
Was selling during bankruptcy a costly move?
In early 2022, Alameda Research secured a 5% holding in Cursor’s parent, Anysphere, for a mere $200,000 when the startup’s valuation was pegged at $4 million. Fast-forwarding to post-FTX’s demise in late 2022, administrators sold this very stake in April 2023 for the same original sum during bankruptcy proceedings.
Cursor’s value skyrocketed within a year, transforming the sale into a sobering lesson for FTX creditors, who lost a golden chance for substantial gains. Currently, SpaceX’s agreement values this 5% stake at a monumental $3 billion, marking the FTX estate’s divestiture price as a stunning undervaluation—approximately 1/15,000th of its worth today.
What does SpaceX’s strategy entail?
This week, SpaceX unveiled its rights to acquire Cursor by 2023’s end, with a valuation set at $60 billion. In the scenario of an incomplete acquisition, a massive $10 billion breakup fee is stipulated. Led by Elon Musk, this strategic move underscores SpaceX’s intent to challenge AI leaders like OpenAI and Anthropic, a challenge Musk has openly acknowledged falling behind.
The acquisition’s delay correlates with SpaceX’s forthcoming IPO. The firm aims for a groundbreaking $2 trillion valuation upon its market entrance. Consequently, the $10 billion termination fee has emerged as a pivotal factor in ongoing discussions.
FTX’s rapid liquidation: A missed fortune?
Following FTX’s implosion, the appointed administrators facilitated quick asset sales to expedite creditor repayments—a decision regretted as several sold assets have since appreciated massively. This is exemplified by Cursor, with its initial investment steered by Sam Bankman-Fried via Alameda and FTX, highlighting a tangible loss for creditors as assets shifted hands prematurely.
“If the assets had been retained during the turmoil instead of sold haphazardly, creditors could have been adequately compensated or even gained,” argues Bankman-Fried. He suggests from prison that the estate might have ascended to a $78 billion valuation without such premature disposals.
The debut of Cursor’s transformative AI tool in 2023 propelled its rapid valuation ascent, with its growth labeled as extraordinary in startup terms. While FTX administrators reimburse creditors in cash and interest, they haven’t managed to convey the significant windfall from recent asset value inflation.
Concurrently, the Bankman-Fried family pleads publicly for his pardon, emphasizing the case’s need for reassessment based on continuing creditor reimbursement. The case of the Cursor stake has become emblematic in their narrative, illustrating misplaced opportunities amid the bankruptcy proceedings.
