How did Elon Musk lost $200 billion?

4 Jan 2023  Read 3051 Views

“The pain of losing is twice as strong an emotion than the joy of winning”. 

Imagine losing the value of your shares, the situation can be traumatizing right, and when the loss figure touches the “billion”, it’s devastating. But this happened in real, and Twitter CEO Elon Musk has become the first person to lose $200 billion from their net worth after Tesla shares dropped, which resulted in his total wealth falling to $137 billion (Bloomberg Billionaire Index). Twitter's board consented to sell the company to Musk for $44 billion in April 2022, so Musk, who has successfully achieved global fame after buying Twitter, took control of this microblogging site after firing its top executives, CEO Parag Agarwal, CFO Ned Segal, and head of legal policy, trust and safety Vijaya Gadde.

After completing his acquisition, he tweeted that “the bird is freed.” However, Twitter employees are yet to see those “good times” as Musk started firing them. So, this is why the social media site’s users have shown him no mercy for such a decline in his wealth. Musk was the second person after Jeff Bezos with more than $200 billion of personal fortune that gave him, the top spot of billionaires in January 2021. And currently, Tesla’s decline in shares contributed to the downfall of Musk’s wealth that is; the shares of his electric car company are down nearly by 65%. This article discusses his journey, net worth and loss. let's get started!

Who is Elon Musk? 

Elon Musk is the founder, CEO and chief engineer of SpaceX; angel investor, CEO of Tesla & Twitter, Inc.; founder of The Boring Company; co-founder of Neuralink and OpenAI; and President of the philanthropic Musk Foundation. Billionaire Elon Musk’s net worth as of 2022 had been $228 billion, Musk joined Queen’s University in Kingston, Ontario, & he then transferred to the University of Pennsylvania, Philadelphia, in 1992, where he received bachelor’s degrees in physics and economics in 1997. Subsequently, he got enrolled in physics at Stanford University in California, but he left just 2 days later as he felt that the internet had much more potential to change society than mere work in physics. 

Companies owned by Elon Musk: Why is Elon Musk famous?

  • Paypal 

In 1995, he founded Zip2, a company which gave maps and business directories to online newspapers & this company was later bought by computer manufacturer Compaq for $307 million. Musk then founded an online financial services company, X.com, that later became ‘PayPal’ for the purpose of online money transfer. The online auction eBay bought PayPal in 2002 for $1.5 billion.

  • SpaceX

Musk also believed that for life to survive, humanity has to become a multiplanet species. Due to his dissatisfaction towards high-range rocket launchers, he founded Space Exploration Technologies (SpaceX) in 2002 to make more affordable rockets. Its first two rockets were the Falcon 1 and the larger Falcon 9 & Falcon heavy which were designed to cost much less than other rockets. Besides being SpaceX's CEO, Musk was also a chief designer in making the Falcon rockets, Dragon (SpaceX developed spacecraft), and Starship (successor of Falcon 9 & Falcon Heavy).

  • Tesla

Musk was highly interested in electric cars. So, chasing his interest, in 2004, he became one of the major funders of Tesla Motors (later known as Tesla), an electric car company founded by entrepreneurs Martin Eberhard & Marc Tarpenning. Tesla introduced its first car in 2006, the Roadster, which could travel 394kms on a single charge unlike several previous electric vehicles that he considered boring, it was a sports car that could go from 0 to 97 km per hour in less than four seconds. The company brought its IPO (initial public offering) in 2010, raising about $226 million. Two years later, Tesla introduced the Model S sedan then received appreciation for Model X luxury SUV etc.

  • Twitter

While discussing the journey of Elon Musk, how can we skip Twitter? The most controversial acquisition of 2022. Its history dates back to 2009 when Musk joined the social media service Twitter & he became one of the most famous accounts on the site, with more than 85 million followers as of 2022. He made multiple tweets in 2018 about taking the company private at a value of $420 per share, which was taken as a joke. The following month, the U.S. Securities and Exchange Commission (SEC) sued him for such tweets, alleging that the tweets were “false and misleading.” This news sent Tesla stock to fall suddenly, and a harsher deal was accepted, which included Musk’s stepping down as chairman for 3 years, though he was permitted to continue as CEO; & the tweets were to be preapproved by Tesla lawyers with fines of $20 million for both Tesla and Musk.

How has Tesla changed the auto industry?

Tesla s an American multinational automotive and clean energy company that manufactures and designs electric vehicles. In 2019, the company used to trade at 178$, but in just two years, it started trading at more than 1200$, and Tesla joined the trillion-dollar club in 2021. The year 2019 had been the worst phase for Tesla as there were production crises & delays in the deliveries, even one of its most valuable employees, JB Straubel, resigned, who designed Tesla's superior battery technology. This is when Ford and Volkswagen tried to enter the market of electric vehicles (EV). Then how Tesla managed to grow in just 2 years? 

Just like Apple entered the smartphone market at a much later stage, but it is still a worldwide market leader; why? As it provided a product service ecosystem. Now, Tesla is even smarter & wanted more players to enter the EV market, more competition more profit. So, Tesla uses three major business strategies value chain illusion, infrastructure leverage, and interlinkage of technologies.

  • Per the value chain illusion, Tesla uses iron-based batteries, driving other companies to use lithium-made or nickel- based batteries. Neither nickel nor lithium is sufficiently available that every car company can use it for a very long time. So, how Tesla played is that it uses iron batteries found in sufficient quantity on earth. So, ultimately other companies will end up with Tesla asking it to manufacture more batteries which Tesla could easily provide at a cheaper cost.
  • The second strategy is infrastructure leverage; the question here is that big automobile companies can raise funds & start selling batteries in the future, so why would companies go to Tesla for batteries? To combat this issue, Tesla planned that by 2025. It will set up around 90,000 supercharger EV stations worldwide, and possibly, Tesla could set up even more by then. This charging station will also be available for other electric vehicles but will charge more from non-Tesla car drivers. Yet Tesla stations will be preferred as the charging capacity will be much more compared to others. This strategy is somewhat similar to Gillette's strategy of making money, wherein it sells its razors at a very low price, but people need to buy blades so they can use them repeatedly.
  • The third strategy talks about interlinkage of technologies wherein Starlink provides high-speed internet connectivity through satellites worldwide. Tesla car's Artificial Intelligence will be able to directly link itself to Starlink to transfer data faster. 

Why did Musk lose $200 billion?

Musk’s bulk wealth is attached in Tesla (TSLA), whose stock plunged 65% in 2022. Basically, the demand for Tesla (TSLA) weakened as competition in electric vehicles from established automakers surged in 2022. Thus, making him the first person ever to experience a direct 200 billion dollar loss from his net worth. The decline in Tesla shares has been so steep that Musk has to sell a lot this year to help cover his Twitter purchase, so they’re no longer his biggest asset. Now, what do you think, even if today Tesla's shares are down? Does it even matter? With Tesla's business strategies, it can easily beat the competition in the near future & its competitors as well. We can possibly say that Elon Musk is in a position where the loss of money will hardly be a problem for him.

About the Author: Kakoli Nath | 137 Post(s)

Kakoli Nath is a legal Content Curator at Finology Legal who pursued BBA.LL.B (5 years integrated course) & she is a patent analyst. She has pursued advanced certification in Forensics Psychology and Criminal Profiling from IFS, Pune.

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