Elon Musk, CEO of SpaceX, Tesla and Twitter, has been in the news for his rollercoaster ride as the world’s richest person. However, recent trends indicate that he may not reclaim this position anytime soon. This article delves into the reasons behind this shift in wealth dynamics and explores the implications of this trend.
Elon Musk, Tesla “Technoking” and the “Chief Twit”, may never be the world’s richest person again. He became the first person in history to have $200 billion of his personal fortune destroyed, and he now spends more time on Twitter. Musk’s income is the starting point for understanding his net worth’s spectacular growth and decrease. The 2018 compensation plan was designed to vest in 12 installments based on the manufacturer meeting specific financial and market capitalization objectives. The pay case’s court has yet to decide on the lawsuit, but the market has already taken a decision.
Tesla stock has fallen 39% since December 1, more than quintupling the loss of the tech-heavy Nasdaq 100. Musk’s net worth has dropped by more than $210 billion since its peak. Fidelity Investments, a Twitter investor, already values the social-media company at less than half of what Musk paid for it, implying that Musk’s estimated 79% stake, which required him to repeatedly sell Tesla shares to help raise more than $22 billion, is now worth less than half of what Musk paid for it.
Tesla’s Musk had around 52% of his shares committed to guarantee debt as of the end of March, according to the 2022 proxy filing, although it does not disclose how much he had borrowed against the pledged stock. The margin-loan agreement that was initially part of the Twitter funding package, on the other hand, gives some hints. Musk could have borrowed $12.5 billion at a loan-to-value ratio of 20%, with a margin call triggering if the amount hit 35%.
Using the same assumptions and the March 31 stock price of $359.20, Musk could have borrowed $19.2 billion against shares worth almost $96 billion. Musk needed to deposit $22 billion in Tesla stock or pay down the debt by $5.5 billion on Oct. 14, when the price closed below $205. Tesla fell another 19% after he began selling those shares until Dec. 12, when he began selling another $3.6 billion of shares.
Musk had stated that when there are macroeconomic concerns involved, it is “usually prudent” to avoid utilising margin debt on any firm. If the about $7.6 billion in total revenues in November and December weren’t enough, Elon Musk has announced his hopes to become the world’s 30th-largest super-app WeChat, but those dreams are a long way off.
He has to find a replacement CEO for Twitter, and Tesla is under pressure to prepare for Musk’s likely departure as CEO. Low financing rates and the reluctance of the world’s top manufacturers to adopt the era of electrification boosted Tesla’s development, but the wide open playing field that Tesla enjoyed for a whole decade is suddenly congested with traditional automakers and new competitors like Lucid and Rivian. In China’s highly competitive EV market, Tesla has been reducing prices and giving discounts, a behaviour Musk has chastised.
