Tuesday, August 3, 2021

The Richest Man In The World And The Story Of Elon Musk’s Tesla

2020 despite all its challenges, was a profitable year for the wealthy. And just after the end of the rollercoaster ride and the beginning of the another, the biggest yield of all the hardships came for Tesla and SpaceX founder Elon musk who became the richest man in the world surpassing Jeff Bezos. The net worth of Elon Musk now stands at $189 billion whereas Jeff Bezos is worth $186 billion.

The world’s wealthiest 500 added $1.8 Trillion to their net worth as per Bloomberg. As of 8 Jan 2021, the top 10 richest people of the world are:

  1. Elon Musk
  2. Jeff Bezos
  3. Bernard Arnault and family
  4. Bill Gates
  5. Mark Zuckerberg
  6. Zhong Shanshan
  7. Larry Ellison
  8. Warren Buffet
  9. Larry Page
  10. Sergey Brin

Tesla CEO Elon Musk Surpasses Jeff Bezos To Become World’s Richest Man

The South-African born engineer and business mogul Elon Musk made history by becoming the richest man in the world. But what does Musk’s journey from the formation of Tesla to its exceptional heights look like?

Uncut Globe is here to decode the extravagant year for Elon Musk and Tesla, with the EV company’s share rising 800% year-to-date (YTD).

Let us look at the history of the company and more about the meteoric rise of the stock.

TESLA INC. (NASDAQ: TSLA)

Tesla Inc. is an American electric vehicle company based in Palo Alto, California (San Francisco). Founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla has focused on solar and electric energy rather than a hydrocarbon energy economy. Elon Musk has been the CEO and the longest-serving employee of Tesla and now enjoys the status of the richest man in the world because of the same. Now ranked one of the world’s best plug-in and battery-energized vehicle companies, Tesla was close to bankruptcy in 2008. Its share price trajectory has been no less than a roller-coaster ride since it went public in 2010.

TESLA stock in 2020

On August 11, 2020, Tesla announced a stock-split, saying that “it would make the share more accessible to employees and investors.” With effect from August 31, 2020, Tesla’s stock was split at a 5-for-1 ratio. A share that was trading at $2,200 plus levels pre-split was split into five shares for each share. This meant that any person holding one share of Tesla stock would receive five shares. The Tesla stock post-split was trading at near $480 levels.

A stock-split does not mean that the shareholder now owns a larger part of the company or that the shares are now available at a discount and is a good time to load up on such stocks. Rather, a stock-split is merely increasing the outstanding shares of the company by issuing more shares to the current shareholders.

What this does in effect is that it reduces the value of each stock and makes it easier for people to own a stock. Companies that usually trade above $1,000 levels have done stock-splits before. Apple’s stock has split five times since the company went public. The stock split on a 4-for-1 basis on August 28, 2020, a 7-for-1 basis on June 9, 2014, and split on a 2-for-1 basis on February 28, 2005, June 21, 2000, and June 16, 1987.

Also Read: Tesla coming to India is exactly what the Central government needed

What you need to know about the Tesla stock for the future

Market capitalization (or market value) is the total market value of a publicly-traded company and is calculated by multiplying the current stock price by the number of shares outstanding. Tesla’s market cap as of January 8, 2021, is $774 Billion. In December, Tesla was, for the first time, included in the S&P 500 index. Joining a major stock-market index will automatically get Tesla shares into the portfolios of thousands of index-tracking mutual funds and send actively managed funds scrambling to catch up with it as well.

However, since its addition, market analysts have been trying to answer if the Tesla shares are worth their value today. Goldman Sachs has a price target of $780, whereas JP Morgan Chase’s target is $90 for Tesla. This imbalance shows the uncertainty around the stock. Musk himself said back in May that Tesla’s share price was “too high” and recently even warned its employees of the inflated share price of the Tesla stock.

A similar bubble was seen in 1999 with the great tech names of the time. Cisco, Oracle, AOL, and Sun Microsystems were all trading at P/E (Profit-earning ratio) levels of 100 and over. 5 years later, the bubble had burst, and large parts of shareholders’ wealth was wiped away. Caution is key if you decide to give in to FOMO (Fear Of Missing Out) and buy the Tesla stock at today’s prices.

Alternate Electric Vehicle companies

These are heady days for shares of electric-vehicle makers, which several market observers pin at least in part on Tesla’s recent successes and ability to generate a fan base. Massive investment flows have gone to EV companies such as Nikola Corp. and China’s Nio Inc., Li Auto Inc., and X Peng Inc. has soared post their initial public offering prices. EV maker Fisker Inc. has also recently filed for an IPO.

Volkswagen has recently committed to spending €73 billion on digital and electric vehicle technologies over the next five years. It aims to produce 1.5 million electric vehicles by 2025, in anticipation of the EU’s new emission targets. One of the world’s largest companies, the 82-year-old Volkswagen has survived countless cycles of boom-and-bust — not to mention dictatorship, war, and the division and reunification of its host country — making it particularly adept at achieving long-term aims such as this one. GM is on its way to an all-electric future, with a commitment to 30 new global electric vehicles by 2025.

The electric vehicle and alternate battery (lithium and Ultium) industry is steadily growing and definitely an industry to invest in for the future. However, the exaggerated market values should also be kept in mind while taking long positions on these stocks. Do not forget to use Stop-loss on your trades if you do.

Rahul Sinha
Rahul is a B.Com(Hons) graduate from Delhi University and a CA final candidate. He is also the co-founder and CFO of a healthcare start-up based out of New Delhi, India. Rahul is an avid investor and holds a diverse portfolio. Having worked for 3+ years with Deloitte in Statutory Audit and then later in a tax profile, Rahul believes in understanding the bottom-up functioning of established businesses and leverages this very knowledge to create value through his company. His next challenge lies in Germany where he will soon be pursuing his masters degree in Finance.

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