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On June 16, Musk’s fortune reached roughly $1.33 trillion, according to Fortune’s reporting based on the Bloomberg Billionaires Index. By August 1, the estimate had fallen to approximately $684 billion.
That represented a decline of more than $600 billion in a little over a month. Fortune described the fall as the largest decline of its kind on Bloomberg’s list of the world’s 500 richest people, apart from Musk himself.
The headline number sounds almost impossible.
How can someone lose $600 billion?
The answer is that the figure represents a decline in the estimated market value of his assets, not $600 billion in cash that Musk spent or handed away.
This distinction is critical.
If SpaceX shares fall by 20%, for example, the value of Musk’s stake can fall by tens or hundreds of billions of dollars on paper.
The same is true for Tesla.
When both companies fall at the same time, the effect can be enormous.
Was It Really One “Mistake”?
The dramatic headline suggests that Musk’s fortune disappeared because of a single mistake in a shocking deal.
The available evidence does not support such a simple explanation.
There was no single transaction in which Musk suddenly handed over his fortune.
Instead, several forces came together.
First was the enormous valuation SpaceX received during and immediately after its IPO.
Second was the subsequent decline in SpaceX’s stock price.
Third was weakness in Tesla’s share price.
Fourth were investor concerns about the enormous amount of capital being directed toward artificial intelligence, robotics, autonomous vehicles and other ambitious projects.
And finally, there were questions about SpaceX’s valuation and the amount of additional stock that could become available to investors after the IPO.
The result was a massive repricing of Musk’s assets.
Why Investors Became Nervous About SpaceX
SpaceX entered public markets with enormous expectations.
The company is no longer simply a rocket company. Its business includes Starlink, satellite communications and ambitious plans involving artificial intelligence and advanced computing.
That gives investors an enormous potential growth story.
But enormous expectations also create enormous pressure.
SpaceX has to justify its valuation through future growth.
The company is also spending heavily on expansion.
Fortune reported that SpaceX’s AI ambitions require substantial capital expenditures and that much of the money raised through the IPO was already committed to various obligations and investments. The report estimated that $62.6 billion, or about 71% of the $86 billion raised when the over-allotment is included, was committed to uses including repayment of a Tesla loan and a spectrum acquisition.
That means the headline $75 billion IPO raise does not simply sit in a bank account waiting to be spent.
A substantial portion is already allocated.
Investors therefore have to judge whether SpaceX can generate enough future cash flow to support its enormous ambitions.
Tesla Added Another Layer of Pressure
SpaceX was not the only source of trouble.
Tesla’s stock also came under pressure during the summer.
The electric-car company has been facing questions about vehicle demand, autonomous-driving progress, robotics and the enormous amount of money being invested in artificial intelligence.
Barron’s reported in August that Tesla’s stock was down substantially for the year, with investors concerned about EV price cuts, delays surrounding the robotaxi rollout and increased AI spending.
Then came a particularly painful trading session in July.
Tesla shares plunged following an earnings report that disappointed Wall Street, cutting more than $18 billion from Musk’s estimated fortune in a single day, according to Forbes.
For an ordinary investor, a stock decline of that magnitude would be difficult to imagine.
For Musk, whose wealth is closely tied to Tesla, it was simply another enormous fluctuation in a volatile year.