In the final two days of trading, Tesla stock has fallen nearly 15% from its all-time high of $ 15, to today’s opening price of $ 766 per share (I’m typing this at 6:30 am Wednesday). With the decline, Elon Musk’s net assets dropped from $ 210 billion to $ 190 billion. In the same timeframe, Amazon’s shares remained basically flat. Unfortunately for Mr. Musk, which allowed Jeff Bezos to retake the crown of the richest man in the world, with a net worth of $ 191 billion. Jeff didn’t get that long to wear the crown, though. With some news just announced, Elon’s luck has brought him back to the top spot … and this is thanks to his other company, SpaceX.
According to a special scoop from CNBC, SpaceX raised a new round of funding, which values the privately held company at $ 74 billion. This is above the $ 46 billion valuation received since its previous raise in August 2020.
For those who may not be aware, private companies sell money and acquire new valuations by selling shares, much like a public company. The only difference is that the company’s shares are not available to buy on an exchange like NASDAQ. For example, CelebrityNetWorth is a private company with a specific number of private shares owned by one person (me). Suppose there are 100 shares. If an investor contacts me and wants to buy some shares, we will negotiate a price per share. We will look at CNW’s profits and losses, recent performance and future growth potential. If we agree that the investor will buy ten shares for $ 100,000, it means that the price of one share will be $ 10,000. My 90 shares will cost $ 900k. All 100 shares will be priced at 100 * $ 10,000 = $ 1 million. In finance parity, CNW will have a market capitalization of $ 1 million (aka market cap, aka valuation). Even in the Finance Parliament, if this was my first time raising money, it would be my “Series A Round”.
Now six months later a new investor comes in and is completely blown away by CNW’s performance and future prospects. This new investor wants to buy ten shares for $ 20,000 per share. And suppose I agree to sell my five shares (reducing my stake to 85) and the investor removes 1 out of 5 from his stake, so that he can take some money off the table. CNW’s market cap is now $ 20,000 * 100 = $ 2 million. My 85 remaining shares are valued at $ 1.7 million and I am only paid $ 100k cash. Investor 1 got his full $ 100k investment back and still owns 5 shares that are worth $ 100k. This is my “Series B round”.
FYI, by my calculations, today’s announcement is SpaceX’s “Series M” round, meaning it has raised 12 first rounds of private funds. The company has raised $ 6 billion in private funds since 2002 from hundreds of investors.
The trick to all of the above is that you can’t just log in to Etred or Robinhood to buy shares in CelebrityNetworth or SpaceX. You basically need to have a relationship with the owners of private stock. Or be very rich and network your way in a meeting with the CFO of SpaceX.
Now that we have a little knowledge base, let’s talk about what SpaceX has just announced.
According to a CNBC report, SpaceX raised $ 850 million in new capital (investor cash) at $ 419.99 per share. This is not a coincidence, a penny shy of Elon’s favorite number, $ 420. At a price of $ 419.99 per share, we can assume that SpaceX insiders sold approximately 2.02 million shares to new investors.
What does SpaceX also do ???
They launched rockets. Some of those rockets go to Mars for scientific research purposes. Some astronauts go to space. Other rockets only carry satellites into Earth’s orbit. These satellites are where SpaceX hopes to kill someday in the distant future.
SpaceX rockets have so far transported more than a thousand satellites. Their plan is to connect 12,000 satellites together to provide high-speed broadband internet to every square inch of the Earth. SpaceX calls this ambitious plan the “Alan Parson Project” … I mean, “Starlink”. SpaceX estimates that Starlink will cost … wait for it … $ 10 million dollars to build.
What? Don’t have much money now? Well for real, he estimates that Starlink will cost $ 10 billion to build and he hopes that someday it will generate $ 30 billion in annual revenue.
How does Elon Musk’s net worth affect this?
As you know, Elon’s total assets are the result of a combination of the value of his bets in Tesla and SpaceX.
When SpaceX raised $ 46 billion in August, Elon was left with a 48% stake. That is $ 22 billion. It is not clear as of this writing that if Elon sold shares today (which reduced his percentage). Let’s assume that his stake did not decrease. This means that today the value of his SpaceX share =
$ 35.5 billion
As I type this article, Tesla has a market cap of $ 745 billion. Therefore, Elon’s 20% share =
$ 149 billion
$ 149 + $ 35.5 = $ 184.5 billion… but this is not a complete equation!
Elon’s unique bonus plan with Tesla has earned him an additional $ 50 billion in shares. Half of those, $ 20 – $ 25 billion, have been approved by the board as of this writing. Let’s be conservative and use $ 20 billion. This is what you get for Elon Musk’s current net worth =
$ 204.5 billion
This is more than enough for the richest person on earth to rocket Elon.
I wonder why he is trying so much to leave the earth! If I were the wealthiest person in the world, I would start a space program that after a year of research “Sorry! Didn’t go anywhere, let’s all live here and worship me!”