Tesla’s Gigafactory 3, Shanghai,
When you look at mega-wealth, you find individuals with higher net worths than the GDP of many small countries. Enough, when combined, to come pretty close to solving the world’s hunger problems. And while some of these uber-rich people do in fact contribute large sums to non-political charitable causes – and some do not – it is because they choose to do so on projects and issue that matter to them. They set the priorities.
Before I drill down on the man who is currently believed to be the richest in the world, Elon Musk, let’s take a look at those at the top. We do not have transparent access to the wealth of drug lords or even political autocrats and monarchs. Does anybody know with any certainty, for example, exactly how much Russia’s Vladimir Putin net worth really is? We know so much more about private entrepreneurs.
Dan Moskowitz, writing for the January 25th Investopedia tells us: “In 2020, there were reportedly 2,095 billionaires on Earth, with an estimated total net worth of $8 trillion. Of this amount, the top 10 wealthiest people in the world account for $1,128.50 billion, or roughly 14.11%, which is impressive when you consider that they represent around 0.48% of billionaires. Below are the [top] individuals currently considered the wealthiest at the time of updating this article—Jan. 19, 2021—according to Bloomberg's Billionaires Index…
Elon Musk is the CEO and co-founder of Tesla; CEO, leader designer, and founder of SpaceX; CEO and founder of Neuralink; and founder of The Boring Company. With an estimated net worth of $197 billion, he is the richest man in the world.
Jeff Bezos is the CEO and founder of Amazon, the world's largest retailer, and founder of Blue Origin. His estimated net worth is $182 billion.
Bill Gates is the co-founder of Microsoft, the largest software company in the world, and the co-chair of the Bill & Melinda Gates Foundation. His estimated net worth is $132 billion.
Bernard Arnault is the chairman and CEO of LVMH, the world's largest luxury goods business, and chairman of its holding company, Christian Dior SE. His estimated net worth is $109 billion.
Mark Zuckerberg is the CEO, chairman, and co-founder of Facebook, the world's largest social networking service, as well as co-CEO and co-founder of the Chan Zuckerberg Initiative. His estimated net worth is $95.6 billion.”
Elon Musk, 49 years old, recently displaced Jeff Bezos (age 57) at the top of the list, and while not the genuine founder of Tesla (the original founders are long gone), clearly as a 20% shareholder and CEO of that company, Musk generates the bulk of his net worth (about $141 billion) from that car and battery maker. Though he joined Tesla in 2004 as a major investor, using money generated from earlier investments in online businesses (like the company that became PayPal and one of the earliest online navigation providers), he has “retroactively” been designated as a “co-founder.” He took the company public and has watched that company’s shares soar. Listed on the S&P 500 Index, Tesla is now a major placeholder for cutting edge electrical vehicles and battery technology. “In 2020, Telsa's stock price experienced an astronomical surge, having risen 705% from the start of the year to mid-December.” Moskowitz.
Miraculously, although Tesla came perilously close to insolvency just a few years ago, Tesla’s “market capitalization of $780 billion far outstrips the combined valuation of General Motors and Ford (about $125 billion), even though Tesla sold 500,000 vehicles last year and the other two companies more than 10 million, combined.” Michael Hiltzik writing for the February 14th Los Angeles Times. Pixie dust? Serendipity? True expectation of eventual market share? A superheated overvaluation in an overall bubble-directed stock market? Financial lemmings following that same call of the wild that told them subprime mortgages were a good investment before the 2007 crash? Or simply, “the future”? A “green future”? Even General Motors has joined the electrical car bandwagon, announcing that by 2035 it expects its entire automotive fleet to be all electric.
Claiming excessive state taxes and regulation, Musk recently moved from California – where his Fremont plant remains one of Tesla’s largest manufacturing centers – to Austin, Texas, where Tesla expects to manufacture its electric trucks. Texas tripped all over itself to lure Musk’s truck manufacturing, which would create as estimated 5,000+ jobs: “Officials in Travis County voted in favor of granting Tesla tax breaks worth a minimum of $14.7 million to build the new plant on a property near the Austin airport that borders the Colorado River.” theStreet.com, 7/15/2020. Quirky – even having faced the punitive ire of the federal Securities and Exchange Commission – Musk seems to revel in his role as mega-billionaire “bad boy.”
Proud of his parallel investment in Space Exploration Technologies (commonly referred to as SpaceX) – his estimated holdings in that privately held entity are estimated at just under $19 billion), he recently announced that Tesla had made a $1.5 billion investment in the cryptocurrency bitcoin. Bitcoin values soared; Tesla shares contracted. Could bitcoins allow consumers anywhere to purchase a vehicle in this extra-governmental currency? Or was this a distraction from a combination of mixed news about Tesla, well beyond the normal skepticism of a possible inflated and vastly overvalued share price for the carmaker? An earnings smoke screen? Bitcoins are generally perceived as exceptionally speculative and volatile investments. With Musk in that market now, bitcoin investors have their own new and volatile market maker to worry about. He could sell on big gain or…
Tesla’s massive new manufacturing operation in China (pictured above), built amidst the trade war between Washington and Beijing, was considered a smart play in the world’s fastest growing market for upscale vehicles. Not to mention China’s fascination (obsession) with coopting US technology. But all is not so smooth in the PRC. A “Feb. 6 report in the Global Times, an English-language publication of the Chinese Communist Party, that the Chinese government had upbraided Tesla for lapses in quality control and consumer relations in China. That’s a concern because Tesla has enjoyed a very favorable relationship with the Chinese government, so far… ‘Tesla has shown respect for the potential of the Chinese market, but not the same level of respect is given to Chinese consumers,’ the publication reported, citing ‘analysts.’…
“[Another] report from German sources [stated] that the company’s German car and battery factories were facing months of construction delays, as well as reduced government subsidies for the battery plant… Musk, who has been accustomed to investors’ buying into his enthusiasms and raising Tesla’s stock price, may have appreciated the extent to which commentary about Tesla focused on its bitcoin adventure rather than its ground-level issues with Chinese regulators and European construction…
“In recent years, these sideshows have included Musk’s public toying with taking Tesla private, an adventure that yielded a punitive response from the Securities and Exchange Commission; Musk’s war with short sellers; his marketing of flamethrowers; and his public spat with a rescue expert who had dismissed Musk’s effort to help save a group of Thai students trapped in a cave.
“The most consistent misdirection Tesla engages in applies to its disclosures of profits. On the surface, these have been a bright spot… In reality, in almost every quarter and throughout 2020, Tesla’s profits have been dependent on the sales of regulatory credits to other companies — without them, Tesla would have been in the red. Last year, for example, Tesla reported $721 million in net income and sales of regulatory credits, which are pure profit, of $1.6 billion.
“The most bewildering aspect of Tesla’s bitcoin investment is the threat it poses to Tesla’s profit-and-loss statement. In disclosing the investment, Tesla said its bitcoin would be carried on its books as ‘indefinite-lived intangible assets.’” Hiltzik. Hmmm. For those who know how to play the game, claim the high ground in “the future,” and understand how to obfuscate and confuse analysts who are trapped between skepticism and not wanting to miss a rapidly rising market opportunity, the challenge is how to keep the magical mystery tour going. Because of its massive valuation, Tesla is unlikely to be the target of a takeover… but it can continue to build new facilities and buy new investments… for now.
I’m Peter Dekom, and this ability to create massive valuations very, very rapidly when compared to the decade’s long rise to the top of days gone by (look at the above list of billionaires) creates some profoundly troublesome questions for governments that seem completely unprepared for this recent phenomenon.
Posts
No comments:
Post a Comment