Billionaires: Elon Musk's net worth plunges by a record $50bn in two days

In our fortnightly round-up, Warren Buffett continues his share-selling streak and Steven Spielberg offloads his superyacht after listing it for $158m

Tesla founder Elon Musk may want to sell shares to cover his personal debts, according to Michael Burry, the investor made famous by the movie 'The Big Short'. AP

Elon Musk

Elon Musk lost $50 billion last week after Tesla shares fell steeply two days in a row.

It is the biggest two-day decline in the history of the Bloomberg Billionaires Index and the highest one-day fall after Jeff Bezos’s $36bn decline after his divorce from MacKenzie Scott in 2019.

Tesla’s rout comes amid a tumultuous few days for the electric vehicle maker. It started when Mr Musk asked his Twitter followers last week whether he should sell 10 per cent of his stake in the company, followed by news that his brother Kimbal sold shares shortly before the poll.

Capping it off was an Insider report on November 9 on Michael Burry, the investor made famous by the movie The Big Short, saying Mr Musk may want to sell shares to cover his personal debts.

The drop narrows Mr Musk’s lead over Mr Bezos as the world’s richest person to $95.7bn. Mr Musk surpassed the Amazon founder for the title for the first time in January and the gulf between the two recently widened to $143bn, a figure greater than the net worth of Bill Gates, the world’s fourth-richest person.

Cathie Wood’s ARK Investment Management, whose funds have been selling shares in Tesla over the past few months, lost more than $750 million in the November 9 sell-off while Oracle founder Larry Ellison, the company’s second-largest individual shareholder, lost $2.1bn.

Despite the slump, Mr Musk’s fortune is still up 70 per cent this year thanks to Tesla’s gains on the back of strong earnings growth and delivery numbers, and a higher valuation for SpaceX.

Tesla’s market capitalisation has stayed above $1 trillion, a benchmark it hit last month after its third-quarter results significantly beat market expectations and rental-car company Hertz Global placed an order for 100,000 Tesla cars.

Warren Buffett

Warren Buffett is signalling wariness with the soaring stock market as he extends a selling streak.

Mr Buffett’s Berkshire Hathaway was a net seller of equities for the fourth straight quarter, a trend not encountered in data going back to 2008. The company ended up selling about $2bn more in stocks than it purchased during the period, adding to a cash pile that climbed to a record $149.2bn.

The selling streak indicates Mr Buffett, 91, has struggled to find bargains with the stock market hitting record highs. A big, splashy acquisition also eluded the conglomerate, as the billionaire and his investing deputies confronted a combination of high price tags and fierce competition from the wave of special purpose acquisition companies.

“The big issue here is that Berkshire was a net seller of stocks again this quarter,” says Jim Shanahan, an analyst with Edward Jones. “That is the primary culprit” of the cash pile continuing to rise.

Berkshire’s sales appear to have largely come from cutting holdings in banks, insurance and financial investments, according to its third-quarter regulatory filing released on November 6.

Berkshire has been paring certain stocks in recent periods, spending the second quarter trimming its investment in General Motors and pulling back on some of its pharmaceutical bets. The company is set to release its third-quarter stock tweaks later this month.

While Mr Buffett has been a consistent net seller these past four quarters, those sales have been relatively small compared with the massive size of his stock portfolio. Over the past nine months, he has sold about $7bn more of stocks than he has bought, about 2.2 per cent of the fair value of Berkshire’s stock portfolio at the end of September.

Mr Buffett warned investors in May that Berkshire might not have much luck striking deals as Spacs gripped the market – although he also predicted the boom probably will not last. Compounding the challenge, his most recent big acquisition, the $37bn deal for Precision Castparts five years ago, resulted in a write-down that Mr Buffett laid squarely at his own door.

Berkshire is not alone in extending a cash pile amid the pandemic. Amazon, Google-parent Alphabet and American Airlines Group were among companies that amassed significant holdings during the pandemic in a step analysts have said would probably lead to some acquisitions.

Steven Spielberg

Billionaire Hollywood film director Steven Spielberg has sold his superyacht, Seven Seas, after listing it earlier this year for $158m.

The new registered owner of the yacht is Zekelman Investments, according to data provider VesselsValue, an entity linked to Canadian steel billionaire Barry Zekelman. Edmiston, a broker involved in the deal, declined to comment or confirm the sale price. Mr Zekelman and Spielberg, who has a personal fortune of $3.7bn, did not respond to requests for comment.

Built for Spielberg in 2010 by Dutch firm Oceanco, the 86-metre yacht has teak decks, a lift and accommodation for 20 guests and 28 crew members. Spielberg is probably making room for his new yacht, a 109-metre boat also being constructed by Oceanco.

The transactions reflect a booming market for extravagant vessels as improving stock markets inject new wealth into the fortunes of the world’s richest and socially distanced leisure gains fresh appeal amid the pandemic.

Yacht manufacturers are rushing to meet demand from both repeat and new customers, including Mr Bezos, who’s enlisted Oceanco to build a 127-metre superyacht at an estimated cost of more than $500m.

The superyacht industry has not slowed down even as pandemic lockdowns largely end. More than 550 new and used yachts longer than 30 metres have been sold so far this year, an increase of about 50 per cent from a year earlier, according to Merijn de Waard, founder and director of Superyacht Times.

The market “continues to soar” and yachts are selling closer to their asking price than they have in the past, with numerous offers becoming more common, he says.

John Foley

Peloton Interactive founder and chief executive John Foley’s stint as a billionaire has ended, at least for now.

Mr Foley’s net worth fell to about $850m on November 5 as shares of the fitness-equipment maker tumbled as much as 34 per cent, after the company cut its annual revenue forecast by as much as $1bn.

Peloton, once a darling of the pandemic economy, benefitted from last year’s lockdowns as people abandoned gyms and bought home-fitness machines. Its stock had soared about six-fold from its 2019 initial public offering to reach a market valuation of $49bn in early January, making Mr Foley a billionaire along the way.

A quickening return to normality, increased competition and strained supply chains are conspiring to curb demand for the company’s stationary bikes and other high-end workout products.

Mr Foley, 50, has pledged 3.5 million shares as collateral for personal loans, equal to 39 per cent of his directly held stake, according to a filing.

In May 2020, Goldman Sachs Bank USA made a regulatory filing showing that Mr Foley had pledged Peloton shares as collateral for a revolving loan. Goldman Sachs, the bank’s parent, was one of the lead underwriters for Peloton’s IPO.

More than two thirds of Mr Foley’s wealth consists of options that give him the right to purchase more Peloton shares over time. He began converting options and selling the resulting shares in monthly intervals last year.

Altogether, he has sold about $120m of Peloton stock, according to Bloomberg calculations. Many of his options are still in the money, even after the share's recent plunge.

Chase Coleman’s Tiger Global Management is among Peloton’s biggest investors, with a 3.2 per cent stake, according to a filing. Other investors include Dan Sundheim’s D1 Capital Partners and Philippe Laffont’s Coatue Management.