(Boursier.com) – Poor Elon Musk! According to the headlines of several major Anglo-Saxon media, the former richest man in the world has lost 200 billion dollars since November 2021, which would constitute the biggest loss of fortune ever observed. To support this thesis, the media in question, which generally does not carry Musk at heart, evokes the gap between certain indices that measure the net worth or fortune of billionaires. The Bloomberg Billionaires Index measured Musk’s net worth at $340 billion in November 2021, up from $137 billion today. The capricious businessman would therefore have lost more than 200 billion dollars according to this measure, and would be “more than” the second richest in the world.
However, these measures do not make much sense. Most of Musk’s fortune in 2021 came from his equity stake in You are here. It was a totally virtual fortune. What is a little more concrete are the 40 billion dollars in cash recovered by the billionaire in fourteen months, with the sale of Tesla shares – to the great regret of certain investors in the capital of the Texan manufacturer of electric vehicles. The first sales of shares were justified by the coverage of a heavy tax increase. Since then, the acquisition of the social media network Twitter likely explains most of Musk’s additional Tesla stock sales. After the last sales, the multibillionaire said he feared a very hard recession, due to the Fed’s monetary policy, which would also justify the need for an additional safety cushion in case of a gloomy scenario.
These measures of billionaire fortunes are largely virtual, as they are most often based on one or more holdings in companies whose stock market prices fluctuate daily. We recall, for example, that Musk has long been head to head with Jeff Bezos for the place of the first fortune in the world, according to variations in the quotations of the Tesla and Amazon stock exchanges. Conquered the throne, the impertinent Elon had mocked the founder of Amazon and his position of ‘number two’ or ‘silver medalist’ – a position that is now Musk’s in the various rankings of this style.
Forbes’ real-time ranking of billionaire fortunes differs slightly from Bloomberg’s and gives Musk a “worth” of $146.5 billion at press time. Forbes recalls that Musk co-founded six companies, including Tesla, SpaceX, Boring Co and Neuralink. The magazine estimates that between his bonds and his options, Musk still controls 25% of Tesla, but that he has pledged more than half of his shares as collateral for the loan. SpaceX would be valued at $127 billion based on a May fundraiser. The Boring Company’s latest capital raising would value this entity at almost 6 billion. Finally, Musk would own about 74% of Twitter, but the social network is not listed, it is no longer possible to know how much the market would value the company acquired for 44 billion dollars – an estimated price that is overvalued by some.
To say that Musk lost $200 billion is therefore quite misleading. On the one hand, the comparison is made against Tesla’s historic peak in valuation, which was certainly ‘in a bubble’ in the short term due to Fed largess, which had boosted some big tech stocks. On the other hand, some of Musk’s assets (Twitter, SpaceX or Boring Co in particular) are difficult to value, since they are unlisted companies. Finally, the market values of the holdings of the big billionaires are completely virtual, as the slightest significant sale of the leader’s shares would trigger a strong bearish market reaction (as was the case with Tesla). Such holdings would therefore not be transferable at market price, since the first sales announcements would cause the share price to fall. Instead of saying that Elon Musk lost $200 billion, it would be appropriate to say that he was never worth $340 billion.
No doubt Musk knows that fortune was very much virtual. “If you had a bad year because you lost money in the markets, remember Elon Musk lost $200 billion and he’s still making jokes on Twitter,” notes one spoof Twitter account. Jerome Powell, prompting a similar reaction to Musk’s indifference emoji.
— Elon Musk (@elonmusk), by twitter