James Burnham, the general counsel for Elon Musk’s xAI, emailed the company's workforce last week with a stark directive: limit all contact with employees of Cursor, the AI‑powered coding platform that SpaceX has the option to acquire for as much as $60 billion. The memo, which referenced a technical partnership announced in April, warned that interactions should be confined strictly to the joint‑model‑training work outlined in that agreement.
Burnham’s warning came after Cursor staff began working inside xAI’s offices and the two teams had already been collaborating for several weeks. The timing, regulators note, raises the specter of "gun‑jumping" – the premature intermingling of assets or joint business decisions before a merger clears U.S. antitrust review. The Justice Department and the Federal Trade Commission can impose hefty fines and even block a deal if they find that the parties have crossed the line.
In the email, Burnham reminded engineers that any conversation could be subpoenaed during the regulatory review. He stipulated that while xAI engineers may share data and code with Cursor for the specific purpose of joint model training, they may not use Cursor’s resources for unrelated projects. Likewise, any intellectual property exchanged must be limited to developing the joint AI model; all other uses are prohibited.
The memo landed on the same day SpaceX filed paperwork for an initial public offering that analysts expect to become the largest ever, valuing the aerospace firm at roughly $1.75 trillion. SpaceX, which merged with xAI in a $1.25 trillion all‑stock transaction in February, will list on Nasdaq under the ticker "SPCX." A recent securities filing confirmed that SpaceX holds an option to acquire Cursor within a 30‑day window after the IPO, with a $10 billion breakup fee if the deal is not completed by the end of 2026.
Inside xAI, the antitrust alert adds to a growing list of operational challenges. Michael Nicolls, a former Starlink engineering vice president, now leads the bulk of engineering for what Musk calls "SpaceXAI," overseeing infrastructure and the Grok chatbot. Nicolls has publicly acknowledged that the division is lagging behind rivals such as Anthropic and OpenAI on coding tasks.
Staff turnover has been high. All 11 of xAI’s co‑founders have departed, and a wave of layoffs in March followed Musk’s frustration with the company’s coding performance. Yet the hiring machine has not stopped; dozens of new employees have joined even as basic internal requests pile up. One anecdote illustrates the chaos: xAI offered workers $420 each to hand over personal tax returns as training data for Grok ahead of the April deadline, but weeks later the promised payments had not been made and the program’s manager was no longer with the firm.
Cursor, for its part, appears financially robust. By February 2026 the startup reported $2 billion in annualized recurring revenue, making it the fastest‑scaling B2B software company on record. Its AI code editor is used by 67 percent of Fortune 500 companies, giving it a strong market position that could justify a $60 billion price tag.
Legal experts say the antitrust risk is manageable if both sides strictly adhere to the separation guidelines. The real question, however, is whether a company wrestling with internal disarray can absorb a massive acquisition shortly after a historic IPO. The next weeks will test both xAI’s ability to stay within the legal walls and SpaceX’s resolve to close a deal that could reshape the AI coding landscape.
This article was written with the assistance of AI.
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