- Elon Musk, Tesla, and SpaceX command a cult following from legions of fans worldwide.
- Musk’s fortune tumbled by a staggering 60% in 2022 according to reports by Forbes and Guinness.
- Forbes magazine broke the news that Musk, the Tesla boss was no long the wealthiest person on the planet. He lost this position to Bernard Arnault of LVHM.
The billionaire’s interest in electric car maker lost more than half of its value in 2022 as shares in Tesla lost over 60% according to a report by Forbes which was quickly adopted by Guinness. Amazingly, despite the substantial loss of value of Musk’s Tesla shares he is still the second wealthiest person on the planet.
This is likely attributable to the high valuation that the market still attaches to the electric car manufacturer’s shares. Shares of the EV company began to tumble when investor’s lost confidence in the billionaire’s ability to devote his time and full attention to the company after acquiring Twitter.
Elon Musk has a cult following. The serial entrepreneur, billionaire, and formerly the richest person in the world has achieved almost mythical status among aspiring entrepreneurs and business people in Africa and beyond the continent. This is not from nothing.
The South-African born serial entrepreneur has been the brains behind some of the most valuable companies in the world today. Many would not be aware that he was one of the co-founders of PayPal and later sold it for over US$ 100 million.
He has made the bulk of his wealth from Tesla, his automobile manufacturing company that specializes in electric vehicles. The EVs, as they are known, have become in vogue since the advent of net zero in a more carbon neutral and conscious world.
Musk and Tesla were among the pioneers in the EV space and he has ridden the wave of that position and all the financial benefit it has brought him to the point that he was the undisputed wealthiest person in the world.
Musk has other companies that include space travel through Spacex and recently acquired a controlling interest in Twitter in a US$ 44 billion transaction. Make no mistake, the man is worth his salt as an entrepreneur and he has the bank balance to prove it. The tech titan is controversial and to say so is putting it mildly. Recently BBC broke the story that Musk had broken the Guinness World Record for the largest loss of wealth in a relatively short period of time.
According to the BBC, from November 2021 to December 2022, Musk lost a staggering US$ 165 billion of his personal fortune. The news outlet attributed this to an announcement from Guinness and Forbes, and went on to say that it believed that this figure of US$ 165 billion is a conservative estimate and that the true figure could be over US$ 200 billion.
The fall in Musk’s fortune has been attributed to the fall in the value of Tesla shares after he bought Twitter for US$ 44 billion in 2022. This transaction sparked a sell off in Tesla shares after investors expressed concern about the serial entrepreneur’s commitment and focus to Tesla.
Before Musk broke the loss-making record, Japanese billionaire investor, Masayoshi Son, held the record after losing US$ 58 billion in 2000.
Where does this leave Mr. Musk in terms of the world’s richest people? As of December 2022, Bernard Arnault, the LVMH supremo is now the world’s richest person. That Elon Musk would lose his mantle as the world’s richest person did not come as a surprise, not to some people who are not star struck by his celebrity but are fixated on facts and fundamentals. It has to be said, the man is still wealthy however, he would be much wealthier if not for some gaffes on his part and also if the global economy was in better shape than it is right now.
Despite Tesla being a game changer, the company’s shares have always been perceived to be overvalued according to venerable banking institution JP Morgan which warned its investors as early as 2019 that the company’s shares were overvalued. An announcement like that would mean investors ought to have borne in mind that an eventual correction would come.
Tesla had a market capitalization of approximately US$ 1 trillion and Musk holds approximately 20% of the shares in Tesla. As stated earlier, the sell-off in Tesla shares began when Musk engaged in a vanity project by purchasing Twitter. The transaction seems to have been driven more by the billionaire’s capricious personality more than it was driven by business sense. It was not without drama which seems to be Mr. Musk’s signature move.
In 2021, the billionaire announced that cryptocurrency, namely Bitcoin would be acceptable as payment for Tesla products. This development pumped up the price of Bitcoin which had been on the rise. Musk announced his intentions to purchase Twitter to much consternation and outrage. There was market wide skepticism that he would complete the transaction. The basis for this narrative was in the fact that he had a few times before tried to pull out of the transaction.
This is classic Elon Musk. What was even more disconcerting for Tesla investors is that the billionaire had been selling shares in the company he runs to fund the acquisition of Twitter. To investors, this is the cardinal sin. The chief executive of a company should not for any reason sell the shares of the company that he runs. It sends a bad signal to other shareholders and the market in general.
When a high-ranking officer of a company sells his interest in a company it makes investors nervous. They worry that management is not confident of the future prospects of the company that they are running. Musk attempted to calm investors and the markets by assuring them that he had ceased all sales of shares in Tesla. Whether Tesla shares will rebound from their poor performance in 2022 remains to be seen. The company reported good but not spectacular results that failed to excite markets. The gradual fall in Tesla shares in 2022 has taken the wind out of Musk’s fortune but he is hardly down and out. He is still the second richest man in the world behind Bernard Arnault.