Elon Musk loses $30 billion in one day amid Wall Street’s tech wipeout
Today, on the 21st of July in the year 2023, at 9.47 in the morning,
Elon Musk's wealth took a staggering hit of $US20.3 billion ($29.5 billion) following Tesla's alarming announcement that it might be forced to continue reducing the costs of its electric vehicles. Consequently, this news caused the company's shares to plummet.
The decrease in total assets to $US234.4 billion marks one of the top seven largest falls ever recorded in the Bloomberg Billionaires Index. This also contributes to reducing the disparity in wealth between Musk and Bernard Arnault, who rank as the world's wealthiest individuals. Despite this, Musk still holds a greater fortune than Arnault, the chairman of LVMH, a renowned luxury goods company, with a margin of approximately $US33 billion.
Elon Musk's wealth has suffered a substantial blow due to Tesla's significant 10% decrease. Source: Bloomberg.
Musk was not the sole technology billionaire from the US who experienced a challenging day. Alongside him, other wealthy individuals such as Jeff Bezos from Amazon.com, Larry Ellison from Oracle Corp., Steve Ballmer, the former CEO of Microsoft, Mark Zuckerberg from Meta, and the co-founders of Alphabet, Larry Page and Sergey Brin, collectively lost a total of $US20.8 billion in net worth. This significant decrease occurred as the tech-centric Nasdaq 100 index dropped by 2.3 percent.
The stock value of Tesla experienced a significant drop of 9.7% to $US262.90 in New York, marking its largest decline since April 20. This decline was a result of Tesla issuing a warning about further negative impacts on its already declining profitability. Over the past few months, the company has been reducing prices, leading to a decrease in its automotive gross margin, which now stands at its lowest point in four years. Elon Musk, Tesla's CEO, stated that if interest rates continue to rise, the company will be compelled to further reduce prices.
Besides the possibility of having to compromise on pricing, Tesla is also investing a significant amount of money in developing new models. One of these is the delayed Cybertruck, as well as their in-house supercomputer called Dojo, which Musk intends to allocate a minimum of $1 billion to by the end of next year. Although Tesla is still on target to manufacture approximately 1.8 million vehicles in 2023, their production for this quarter will decline temporarily due to factory improvements.
Musk expressed the idea that it is rational to prioritize producing a greater number of vehicles, even if it means sacrificing profit margins. This is because he anticipates a significant rise in the value of Tesla cars in the near future, thanks to the introduction of autonomous-driving features. Musk believes that these advanced capabilities will enhance the worth of cars that have already been sold.
Tesla's stocks have experienced substantial growth throughout the year, but suffered a significant setback on Thursday in New York. Analysts suggest that investors might be apprehensive about the profitability of the electric vehicle manufacturer following their decision to lower prices. This development has raised concerns among market observers. Credit: Bloomberg
Tesla is currently facing another hurdle with an increasing surplus of vehicles in their inventory. The company has disclosed that they now possess a supply that could last for about 16 days worldwide. This figure has risen from the previous quarter's 15 days and has significantly spiked compared to the mere four days worth of stock they had a year ago. The accumulation of their inventory persists, even with the implementation of substantial price reductions on their highly popular models, along with incentives like complimentary charging that Tesla has been providing to potential buyers.
Musk, aged 52, earns most of his riches from his ownership of the electric vehicle company, along with his investments in Space Exploration Technologies and Twitter. He has seen a substantial growth in his wealth, which has risen by approximately $118 billion in this year alone, thanks to the remarkable 136% surge in Tesla's stock.
Arnault, aged 74, has witnessed an increase of $US39 billion in his overall wealth, bringing it to $US201.2 billion this year. The stocks of LVMH, headquartered in Paris, have surged by 26% in the year 2023.
The Market Recap newsletter is a comprehensive summary of the day's trading activity. You can receive it every weekday afternoon.
