Elon Musk has seen his fortune take a historic hit after a sharp selloff in SpaceX shares wiped hundreds of billions of dollars from the company’s value in just a matter of days.
Based on current statistics, Musk’s net worth has reduced by more than $350 billion over the last week owing to the fall in SpaceX stock by more than 31 percent from its all-time high.
This reduction is one of the biggest single-week losses ever recorded, considering the size of Musk’s equity in the firm as well as the growth of SpaceX over the years.
Musk still holds ample money
Musk continues to retain his lofty status in spite of this misfortune. The billionaire’s net worth has been reduced from somewhere around $1.45 trillion to approximately $1.1 trillion, making him a trillionaire, albeit not as rich as before the sharp fall of the markets.
This development also represents a loss on the part of SpaceX itself. The company had reached an estimated market value of about $3 trillion and for a brief period of time, found itself amongst the highest-valued companies in the world, surpassing tech giants like Amazon and Microsoft in market capitalization.
SpaceX’s market capitalization currently stands at about $2 trillion, indicating that it lost approximately $900 billion and fell into seventh place in terms of being the highest-valued firms in the world.
In essence, the loss incurred by Musk is related to his shareholdings in the company. For he owns 38 percent of SpaceX’s stocks and options.
Why the decline?
There seems to be a variety of reasons behind the recent drop in the share price. Perhaps one of the most important is the sustainability downgrade issued by MSCI, one of the largest ESG rating agencies in the world. According to MSCI, SpaceX received a “CCC” rating on a scale of seven grades due to possible problems with the management of the company’s risks associated with the environment, society, and governance.
It should be noted that ESG ratings do not influence the operations of any company but might be a factor in the decisions made by investors. This downgrade came amid growing doubts about some of the company’s strategic decisions.
For example, SpaceX recently acquired the AI coding startup Cursor for $60 billion using the method of all-stock transactions. Those who supported such an acquisition believed that this step meant the bold move of SpaceX into artificial intelligence.
Nevertheless, some people thought differently, noting that all-stock acquisitions will increase the amount of the stock in the market, and therefore will reduce the value of stocks in the hands of shareholders.
In order to address such concerns, SpaceX stated that it intends to utilize more debt financing in the future.
The company has already announced its intention to sell corporate bonds to finance its operations and pay off a temporary loan. This way, SpaceX will be able to receive the necessary financing without selling extra shares and diluting its shareholders even further.
In spite of the market volatility, the company continues implementing its general growth plan.
SpaceX has been increasingly marketing itself as a supplier of AI infrastructure in addition to its core business of aerospace manufacturing and satellites. Such initiative was recently seen when the company has signed a computing contract with Reflection AI worth about $6.3 billion.
According to the terms of the deal, Reflection AI will use computing power offered by SpaceX’s growing data centers to train its artificial intelligence algorithms.
This initiative comes as an attempt to benefit from the high demand for computing services in the AI industry which is considered one of the greatest growth areas by many tech firms.
For investors, the recent sell-off is just another reminder that no matter how valuable a company is, it can always experience drastic market pullbacks. The issue with valuation, corporate governance, mergers and acquisitions, and future growth can rapidly change the mood, especially if the expectations are very high.
The numbers are quite mind-blowing for Musk. Losing over $350 billion in one week would be something unfathomable for any other person on Earth. But the reality that he still owns more than $1 trillion despite this pullback speaks volumes about the magnitude of his wealth.
