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Musk will shoot down $100 billion in 2022 as Tesla Tanks

by SuperiorInvest

How do you end up with a personal net worth of $169.8 billion in a bear market? If you are a Tesla Inc. (TSLA) CEO and owner of Twitter Elone Musk, you start the year with $270.3 billion and then let gravity do its thing.

Key things

  • Elon Musk’s personal fortune has fallen by more than $100 billion in 2022 as of Monday.
  • The losses are the result of a sharp decline in Tesla’s share price, which has fallen 52% this year.
  • Musk owns a 23% stake in Tesla through stock and stock options, despite selling $19 billion worth of stock this year.
  • Tesla’s options, which represent about $50 billion of its assets, are at issue in the Delaware lawsuit.

Musk has already used a variation of the joke in reference to his recent $44 billion acquisition of Twitter after previously admitting he overpaid for the social network. Still, Musk’s loss of more than $100 billion in personal wealth since the start of 2022 is largely the result of his nearly 23% stake in Tesla, the leading electric vehicle maker.

Tesla shares fell 52% for the year to Monday’s close, outpacing the 29% decline in the Nasdaq-100 and the 17% decline in the S&P 500.

Vertical lines indicate sales of Musk’s stock. Source: TradingView.

Investor confidence in Musk’s claims about Tesla’s bright future has been dented by the outbreak of COVID-19 and the accompanying economic slowdown in China, as well as the distraction Twitter has become for the Tesla CEO and self-proclaimed “technoking.”

Rising US interest rates were another factor that curbed investors’ appetite for risk and deflated many of the most expensive US stocks. Tesla still trades at nearly 8 times sales and 31 times forward earnings.

Musk contributed to the decline by selling about $19 billion worth of Tesla stock this year, most recently offloading $4 billion worth of shares on Nov. 8 after saying on two previous occasions that he planned no more stock sales in 2022. Musk has sold another $22 billion in Tesla stock in 2021, earning nearly 50% at the top of the stock’s rally last year.

The latest stock sale left Musk with Tesla shares at about 14% of shares outstanding. He also owns put options corresponding to a stake of about 9%. Between Tesla stock and vested options, Musk’s stake in Tesla is worth about $122 billion. That means he stands to gain or lose $1.2 billion, at least on paper, for every 1% movement in Tesla’s stock price.

This year’s twist of fate left Musk just $23 billion ahead of the nearest challenger to his richest man’s bragging rights as of Nov. 21. He could lose that title if a Delaware judge sided with a shareholder who challenged the legality of Tesla’s 2018 option grant to Musk, who is responsible for the vested options he now holds.

Musk could also be dethroned if Tesla’s stock continues to fall. His closest challenger is Bernard Arnault, chairman of the French luxury goods conglomerate LVMH, whose value as of November 21 reached $157 billion. Arnault is also down significantly this year, while Indian ports and coal tycoon Gautam Adani added $53 billion this year to move into third place. a place with assets estimated at $130 billion.

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