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Almost immediately, analysts began examining the IPO from another perspective.
If investors were willing to pay significantly more than $135 for SpaceX shares as soon as trading began, why had the company priced the IPO so low?
That question led to an extraordinary calculation.
Fortune reported that SpaceX effectively left approximately $16.7 billion on the table by pricing the offering below the level the market subsequently demonstrated it was willing to pay. The figure includes the impact of additional shares made available through the IPO’s over-allotment mechanism.
In other words, SpaceX could theoretically have raised substantially more money if it had set the initial price higher.
For a normal company, leaving billions of dollars behind would be considered an enormous financial mistake.
For SpaceX, the situation is more complicated.
The company had a reason to want a successful debut.
A newly public company does not want its stock to collapse on the first day. Pricing an IPO conservatively can create strong demand, encourage institutional investors and produce a successful first trading session.
The strategy worked.
Perhaps too well.
The stock surged, investors made immediate gains and SpaceX established itself as one of the world’s most valuable publicly traded companies.
Yet the billions that might have gone into SpaceX’s corporate treasury instead became wealth for the investors who bought at the IPO price.
That is why some observers have described the pricing decision as a costly mistake.
Then the Market Turned
The real shock came afterward.
Instead of continuing to climb indefinitely, SpaceX shares began falling.
Tesla was struggling at the same time.
Because Musk owns major stakes in both companies, declines in their share prices can translate into enormous changes in his estimated net worth.
This is one of the most important facts to understand about billionaire wealth.
Musk did not have hundreds of billions of dollars sitting in a bank account.
Much of his wealth existed as ownership stakes in companies.
When those companies become more valuable, his net worth rises.
When their market values fall, his net worth falls.
No vault has to be emptied.
No enormous bank transfer has to occur.
The number simply changes because the value of the underlying assets changes.
And in Musk’s case, the movements can be almost incomprehensibly large.