We report a novel mechanism, consisting of redistribution of valence electrons near the Fermi level, during interactions of intense femtosecond X-ray pulses with a Co/Pd multilayer. The changes in Co 3d valence shell occupation were directly revealed by fluence-dependent changes of the Co L$_3$ X-ray absorption and magnetic circular dichroism spectra near the excitation threshold. The valence shell redistribution arises from inelastic scattering of high energy Auger electrons and photoelectrons that lead to transient holes below and electrons above the Fermi level on the femtosecond time scale. The valence electron reshuffling effect scales with the energy deposited by X-rays and within 17 fs extends to valence states within 2 eV of the Fermi level. As a consequence the sample demagnetizes by more than twenty percent due to magnon generation.