xAI advises its staff to minimize interactions with employees from Cursor.

      TL;DR: xAI’s legal counsel has advised employees to restrict communication with Cursor staff just weeks after the two teams began collaborating, raising concerns about potential antitrust violations related to a possible $60 billion acquisition connected to SpaceX’s impending IPO.

      Elon Musk’s xAI instructed employees to minimize interactions with Cursor, the AI coding startup that SpaceX may acquire for $60 billion. This directive, issued by James Burnham, xAI’s general counsel and former chief legal officer at the Department of Government Efficiency, was reported by Bloomberg.

      Last week, Burnham provided guidelines to xAI staff, stating that their contact with Cursor personnel should be limited to what is necessary to fulfill a technical partnership announced in April. This partnership enables collaboration on computing resources and coding, but it is legally distinct from the potential acquisition.

      The timing of the directive raises issues. Cursor employees have already been working at xAI’s facilities, and the two teams have been collaborating on various projects for several weeks. The legal advice that should have been issued before this collaboration arrived only after it had commenced.

      U.S. antitrust laws prohibit what regulators term "gun-jumping," or the unauthorized mingling of assets and joint business decisions between merging companies prior to securing approval from the Justice Department or the Federal Trade Commission. Breaches can lead to hefty fines and potentially hinder or collapse a transaction. Burnham’s message reminded staff that xAI and Cursor remain distinct entities that must operate independently until any deal receives regulatory approval.

      The implications are significant. Employees were cautioned that their communications could be subject to subpoenas during the regulatory review process. Any evidence suggesting that the two companies improperly combined operations could jeopardize the entire deal.

      According to the guidelines, xAI engineers can share data and code with Cursor for collaborative model training but are prohibited from utilizing Cursor resources for unrelated tasks. Both parties can use each other’s intellectual property, including the Grok chatbot, solely for developing the joint model, while other uses are restricted.

      This warning coincides with SpaceX submitting paperwork for what is anticipated to be the largest IPO ever. Having merged with xAI in a $1.25 trillion all-stock deal in February, SpaceX is planning to list on the Nasdaq under the ticker SPCX with an estimated valuation of around $1.75 trillion. A recent securities filing confirmed that SpaceX has the right to acquire Cursor within a 30-day period following the company's public offering. Should SpaceX not exercise this option by the end of 2026, it would incur a $10 billion breakup fee.

      Within xAI, the antitrust advice is just one aspect of a larger operational challenge. Michael Nicolls, a SpaceX vice president and former Starlink engineering leader, has assumed control of engineering at what Musk now refers to as SpaceXAI. This division encompasses infrastructure and Grok development, with Nicolls publicly acknowledging that the company is “clearly behind” its competitors.

      The personnel situation further illustrates the issue. Musk ordered layoffs in March due to dissatisfaction with xAI’s coding performance compared to competitors like Anthropic’s Claude Code and OpenAI’s Codex. All 11 co-founders of xAI have departed, and job cuts have continued even as many new hires are made. The operations team is overwhelmed, resulting in delays in processing basic internal requests.

      A specific instance highlights this dysfunction. xAI offered employees $420 each for their personal tax returns to use as training data for Grok before the April tax deadline. Two months later, those payments remain unpaid, and the manager responsible for the initiative is no longer with the company.

      For Cursor, the situation is also precarious. The startup reached $2 billion in annual recurring revenue by February 2026, making it the fastest-scaling B2B software company ever, with 67 percent of Fortune 500 companies among its user base. Cursor has every reason to maintain distance from the internal disarray of xAI while the acquisition timeline progresses.

      While the antitrust risks are significant, they can be managed if both parties adhere to the established rules going forward. A more pressing question, however, is whether a company that struggles to pay employees $420 on time, has lost all its co-founders, and is simultaneously downsizing while hiring new staff is equipped to handle a $60 billion acquisition just 30 days post-IPO. The success of SpaceX’s Cursor deal hinges on execution, an area where xAI has faced considerable difficulty.