How much actual spendable revenue does that translate into? A lot yeah, but not $400 billion.
Right. And that’s why he had to borrow money to buy Twitter despite it being a fraction of his supposed “worth” at the time.
With these rich lists, it’s worth remembering
- The real richest people in the world are likely among those who are not obliged to declare their assets, and therefore don’t show up on lists like these.
- There are different flavors of billionaire, and often the lowest tier show up highest in these rich lists. Musk is basically in the middle; Tesla, SpaceX and Twitter make products that people pay money for (obviously Twitter to a lesser degree). Nonetheless a lot of their share value right now is speculation far beyond their current revenue. If Musk tried to sell a significant portion of the stock the value would likely tank. ChatGPT reckons he could liquidate down to ~$150 billion fairly quickly, more of course if he could take several years (Yes CGPT is not perfect, but it’s going to be a guesstimate whoever gives it).
SpaceX: Starship experienced a rapid unscheduled disassembly during its ascent burn.
Hmm, something like that will happen to the USA,
For billionaires, what’s a typical percentage of wealth held as liquid i.e., readily spendable?
It varies a lot, so I think that getting a “typical” number would be misleading.
There are billionaires who have nothing but shares, so buy their fancy houses and supercars all with bank loans. I’ll gladly pay you Tuesday for a private jet today.
And there have been recent examples of hotshot tech founders who went overnight from billionaire, to delinquent holding worthless shares and owing the bank millions.
Meanwhile people like bill gates I gather has held assets / a diversified portfolio equal to his net worth for decades.
Wouldn’t the agreement be to have the stock be the collateral for the loan? Or are the banks wiser than that?
Virtually all billionaires today employ “Buy, Borrow, Die” as a strategy, so they have whatever % of their worth their private banker is comfortable loaning them. What that is probably depends on the assets- $30 billion all in something volatile like Bitcoin will have a smaller LTV allowance than a broadly diversified portfolio.
That is the agreement, but the bottom can fall out of the share price eg if it’s found out that your main product is a dud.
Anyway, I need to stop here as I’m no expert on this stuff.
We talked about this a fair bit last month:
Ah, I see now: the loan agreement almost certainly says “X dollars worth of stock at the time the loan is due”, not “X shares of stock”.
Not exactly. Because they never actually pay the loan back, just roll it into new loans.
$100 million is due in two years.
When that comes due, you borrow $205 million. $105 million to pay off the first loan, and another $100 million to play with for the next two years.
As long as you have enough wealth to generate more than the interest you’re rolling over each period, you’re fine. Even if you don’t, as long as the delta between what you’re borrowing and what you have is large enough.
And that’s why it only works for the truly wealthy. You might have $1 million saved, but assuming you need (say) $100,000 per year, you’re probably going to run out of borrowing capacity.
Just thought I’d give this a bump:
https://thehill.com/policy/technology/5133777-elon-musk-threatens-republican-senators/
You know, regardless of what side of the aisle you’re on, something really does need to be done about billionaires being able to just openly buy politicians.