Elon Musk Becomes First Person Ever to Lose $200 Billion
But did he ever really have it?
So says Bloomberg columnist Brian Chappatta:
Elon Musk was the second person ever to amass a personal fortune of more than $200 billion, breaching that threshold in January 2021, months after Jeff Bezos.
The Tesla Inc. chief executive officer has now achieved a first of his own: becoming the only person in history to erase $200 billion from their net worth.
Musk, 51, has seen his wealth plummet to $137 billion after Tesla shares tumbled in recent weeks, including an 11% drop on Tuesday, according to the Bloomberg Billionaires Index. His fortune peaked at $340 billion on Nov. 4, 2021, and he remained the world’s richest person until he was overtaken this month by Bernard Arnault, the French tycoon behind luxury-goods powerhouse LVMH.
The round-number milestone reflects just how high Musk soared during the run-up in asset prices during the easy-money pandemic era. Tesla exceeded a $1 trillion market capitalization for the first time in October 2021, joining the likes of ubiquitous technology companies Apple Inc., Microsoft Corp., Amazon.com Inc. and Google parent Alphabet Inc., even though its electric vehicles represented only a sliver of the overall auto market.
Now Tesla’s dominance in electric cars, the foundation of its lofty valuation, is in jeopardy as competitors catch up. It’s offering US consumers a rare $7,500 discount to take delivery of its two highest-volume models before year-end, while also reportedly reducing production at its Shanghai plant.
Meanwhile, with pressure on Tesla intensifying, Musk has been preoccupied with Twitter, which he acquired for $44 billion in late October. He’s applied a move-fast-and-break-things approach such as firing staff then asking them to come back and applying content policies haphazardly to justify banning the accounts of some prominent journalists who cover him.
The decline in Tesla shares has been so steep — the shares fell 65% in 2022 — and Musk has sold so much this year to help cover his Twitter purchase, that they’re no longer his biggest asset, according to Bloomberg’s wealth index. Musk’s stake in his closely held Space Exploration Technologies Corp., at $44.8 billion, exceeds his approximately $44 billion position in Tesla stock (he still has options worth an estimated $27.8 billion). Musk now owns 42.2% of SpaceX, according to a recent filing.
Watching the absolute meltdown associated with Musk’s acquisition of Twitter has been amusing, if also somewhat saddening. The social outlet is a valuable resource if used correctly but its value has diminished considerably since the takeover.
At the same time, these wealth estimates are absolute hooey and everyone who’s paying attention knows it. Twitter, Tesla, and SpaceX are all speculative enterprises and their stock values are ephemeral.
As we saw with his leveraging of his Tesla stock to finance his Twitter purchase, the mere fact of Musk’s selloff—indeed, even rumors that he might liquidate significant portions of his holdings—results in an instantaneous decline in its paper value. The company was losing huge sums of money for years and only finally turned a paper profit in 2020. But even that wasn’t really from doing what it’s ostensibly in business to do: selling electric cars. As a September 2022 Forbes report notes,
What really kept Tesla afloat were emissions credits, namely the sale of these credits. Since Tesla manufacturers electric vehicles, it receives carbon credits from various clean energy government incentives. Tesla then turns around and sells these credits to other automakers in the field, like General Motors for instance.
Further, its profits from automotive sales could be short-lived, indeed, as it looks to be mostly a function of sales in China, which could go away at any point given the regulatory environment surrounding US “competition” with the PRC.
Regardless, Musk remains a very rich man. We just have no idea how much wealth he really has because it’s mostly based on ostensible stock values.
Not really. Given that short sellers have believed Tesla was ripe for a fall for a long time and was only kept frothing due to the stock holders wishes and hopes. The stock probably has further to fall and quite likely will be slow to recover.
Eventually the market will correctly price companies and it will Tesla.
Tesla has made a large share of its profits from selling tax credits. 2021 was the first year they made profit just from selling cars and it has remained a large share of its profits. If you look at Tesla’s chart it looks a lot like the Bitcoin chart. It perks along at around $30-$50 then shoots up to around $400 and is now shooting down. At that peak, again from memory, it had a PE of about 300. So it has been incredibly speculative and also dependent upon he tax credits which could easily disappear. Tesla is now facing a lot of competition and some of those vehicles are better. Plus, you can use standard chargers with other cars.
Anyway, he still has lots of money. Just watching from afar he doesnt seem so interested in work anymore and much more in spending his time shitposting on Twitter and arguing with people.
https://www.theverge.com/2021/7/26/22594778/tesla-q2-2021-earnings-revenue-profit-credits-emissions-bitcoin
Steve
Anybody else get the email from Twitter I got yesterday? I was invited to see how many friends I have on Twitter by letting Twitter see my address book. On the one hand, apparently they’re trying stuff beyond pandering to the MAGAts. On the other, like I’m gonna share my personal data with Musk?
Most people can easily know how much they have by counting the change they have in their pocket. Rich people have assets whose nominal values may vary. People sometimes claim that their assets are bigger than what a cold-hearted market would actually yield. I happen to own a $17 million house, a $10 million painting of dogs playing poker, and a baseball signed by George Brett that worth at least one million. I found Musk’s claim to be the richest man in the world something a teenage bragger would say; real rich guys keep their mouths shut
“Very” is an insufficient word to apply to how rich Musk is. Another reason we have no idea how much wealth Musk has is because of how unfathomable these wealth numbers are. $200 billion is such an enormous number that you have to convert it to something tangible for people to even begin to make sense of it. My math may not be precise, but Musk could set fire to a $100 dollar bill every second and it would take more than 60 years to burn through $200 billion. We’re numb to the kind of inequity that kind of wealth represents.
@gVOR08:
I didn’t realize I was getting emails from twitter but I see now that I am – I haven’t looked to see when that started though. Nothing about my address book in the last couple of days though.
( I seldom look at the address I used to sign on to twitter as it is swamped with emails being a semi- throwaway address).
Dear Twitter:
I just got a new phone and since I was unable to transfer files from my “not so smart” LG-vn280 to my iPhone SE I trimmed my contact list to the bone. Here it is. Go get ’em Twitter!
(poke poke poke…looking for contacts on new phone…poke poke poke…hit contacts icon on home screen, empty, damn, I know I did this where did it go…poke poke…screw this…now I gotta’ make a new list)
Economic innumeracy:
Unless you are subscribing to the quaint archaicism that only gold is real value, or similar archaicisms, that is nonsense (except of course if one confuses wealth to mean cash, a frequent popular confusion).
(1) insofar as his wealth as valued was based on freely trading stocks, one had and has the most equitable view of the value of his wealth, given ongoing price discovery. Value is in the end a subjective social construct, even for gold… difficult for humans to accept but true.
(2) the real value view has more foundation for illiquid, non-trading assets (private company, real estate that is not in a traded vehicle
(3) the lesson you can actually take away from Musk’s value collapse is not that you did not know what his wealth was, but rather the value of asset wealth is inherently much less stable than popularly thought of and conceived.
(4) secondly lesson is the permanently underappreciated difference between Liquidity (or liquid) and Wealth, a difference that has tripped up the asset rich since ancient times (see the standard trope of land wealthy but cash poor aristocracy, going into debt for liquidity). Or being Asset Rich, Cash Poor. Productive assets are the fundamentals of wealth, but that is different than having liquidity / cash.
Regrettably people really have a terrible time successfully mentally differentiating money and wealth (or the three embedded aspects of money – unit of account; store of value; medium of exchange – and wealth & assets). Thus bitcoin.
He absolutely had it, it was leveragble for liquidity to buy Twitter (a gross error of course) and resisted significant shorting prior to the Twitter fiasco.
But then he started to destroy it himself, rendering this all the more perverse and stupid.
While all the markets are down and the various flavours of Tech, hard or IT, are signficantly down, TESLA is down more very clearly more due to accelerating concerns about (A) Musk’s idiotic obsession with Twitter, and neglect of TESLA, (B) massive selling into the market – which always drives down price (all things being equal, supply, demand), (C) Musk’s ongoing general self-harm to the broad Brand (Mus/TESLA) for reasons that quite escape other than perhaps he’s gone unhinged or has too many Yesmen Bros around him and ont enough guardrails.
@Sleeping Dog:
No it won’t.
Let’s consider what a share in Tesla (or any company) grants the holder:
– dividends (typically zero)
– the right to vote for the board
– the right to sell the share
If the dividends are zero, and the vote for the board has no chance of changing things, we are down to the right to sell the share.
A share of stock is basically a trading card. Except it doesn’t even have a nice picture or come with a stick of gum. It’s a fiat currency with some vague rules about what the value should be in terms of a P/E ratio, but even those rules go out the window when the company is a household name.
It’s vibes.
@Gustopher:..It’s vibes.
If that’s all it is I’m sure everyone out there will be glad to trade me their shares of AAPL for a few bars of this.
@Lounsbury: Somehow I think James understands perfectly well. His failing, if any, was writing one sentence, which we all understood, when he could have written a 500 word dissertation instead.
@Gustopher:
In the hope of fending off a possible long, deprecating response from elsewhere, stocks aren’t really fiat currencies.
I can, by government fiat, pay my taxes with dollars, and because I can, I can also buy my groceries with dollars. (Actually with 1s and 0s but that’s a different topic.) I can’t pay my taxes or buy groceries with Tesla stock, even GM stock.
Dr. K and others will tell you Bitcoin is pretty much exactly a baseball card, without even the intrinsic value of the bubblegum. Nominally a stock represents a real stake in a company, but you can’t go to GM and demand a drill press in exchange for a stock certificate. You can, however, readily trade stocks for fiat currency on established, more or less transparent, markets. A share of Tesla isn’t exactly a trading card, but you’re correct to say it’s close.
@gVOR08:
Which is why two lines into Louns’ current diatribe as economic MOU and scold to lefties/simplistic American simpletons oversimplifying complicated unsimplifiable stuff, I skipped over to the next comment rather than reading his.
@Just nutha ignint cracker: And Louns wrote waaaaaaay more than 500 words, btw.
@gVOR08: No he clearly doesn’t else the long post about real value and was it ever real would not have been written.
The two are not reconcilable, understanding that and posing the questions / statements he did.
He rather clearly suffers from the usual largely unconscious confusion of money and wealth, and equally lack of real acceptance that value is purely subjective, fundamentally in the bones not there.
@Gustopher: You do not understand stocks. There are not vague rules about P/E ratios – certainly rules of thumb on P/E (trailing or forward) if you are making an analysis on current value. That is one view to take, the classic Value Investor. Other views – discussable as they may be – are making bets on the future value potential based on the company becoming a permanently leading player, a Microsoft, a Google, an Intel etc. The Growth Investor view.
If there’s no fundamental basis for asset value then it is trading cards. However if there is a reasonable real world utility, then it is not, if there is at least a colourable chance that by technology or infrastructure etc the company becomes a long-term key player. Certainly TESLA unlike Bitcoin has a colourable chance to being a permanent part (whether independent or not, as in sold to a major) of the new transport technology mfg base. Colourable needs analysis – UBER for example never had a colourable play if one did the numbers on real world taxi-like transport unless one made mad monopolistic position forecasts and presumed that this would not provoke global regulatory backlash. TESLA is in another category (for all that I would personally say the Shorts are more right).
@Just nutha ignint cracker: 381 words mate. You lot need to find other items to whinge on about.
@Gustopher: Sorry. I tried @gVOR08: to protect us from another lecture.
@Lounsbury: You need to stfu and listen. Not talk for a week or a month or a year… Just listen. You might actually learn a thing or 3.
Not that that will ever happen.
Surely someone like Elon, so able, so smart, and with such a big ego, can manage to lose far, far more than a mere $200 billion.
@Lounsbury:
I think everyone, except perhaps you, understood James to mean that Tesla stock was probably (radically?) overvalued, as trendy stocks can be, and so Musk did technically have a certain calculated wealth. However, since his stock was likely considerably overvalued, he wasn’t going to be cashing out, and attempting to cash out in the ways available to him would have tanked his stock, him being ‘worth’ however many billion didn’t mean as much as if he had his wealth in something less transitory and overvalued. That, however, doesn’t roll off the tongue or keyboard and so he used a shorthand that every sensible non-pedant understood.
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