Who is Elon Musk really?

[red750]

Not Elon exactly, but his old man Errol Musk.

 

When asked about him getting his step daughter pregnant, he laughed and said "She got herself pregnant."

[old man emu]

Here's a bit about Musk's wealth. What I found more interesting is the comment relation to stock and the stock market.

 

[Jerry_Atrick]

It has always been rare that a brand new venture has come fresh to the stock markets (which is really a share market, as stocks include all cash instruments - debts, futures, etc.. Another American misappropriation of the English language). 

 

When they do, they normally go the the "second" boards. The ASX no longer has one as these are less regulated boards and they are literally for investors who can throw whatever investment they have down the drain. Often dubbed penny stocks, you can make a lot of money or lose everything. The London Stock Exchanges operates AIM, but it is subject to  tighter rules than most secondary boards, and hence it is more for companies seeking earlier cash than would float on a main board. 

 

I am not an equities analyst, but I would suggest that Tesla's stock price is reducing thanks to lower earnings forecasts thanks to robust competition in the EV market and probably the electricity storage market. Their first mover advantage is probably waning. 

 

The SpaceX loss may be temporary or permanent - who knows. As I understand (and I just skimmed one news article, so take it on that basis), shortly after the listing SpeceX issued a sizeable chunk of bonds, which is debt.  Firstly, it changes the capital structure of the firm and puts the debt holders in front of the shareholders if the company goes belly up.. and of course introduces fixed costs into the business in interest payments. Secondly, as I recall, the planned bond issue was not in the prospectus, so it caught share investors off guard and as large bond holdings effectively dilute shareholder claims to the assets, it further reduced the price. 

 

The second point is interesting. I  would not be surprised if some of the larger initial investors or early on after listing purchasers of the shares have consulted their legal advisers. Planning a bond issue takes some time as it has to go through all sorts of hoops legally, sounding investors, roadshows, and the like. It wold hardly be something that wasn't in the planning before the IPO. If they could prove on the balance of probability it was in the planning or discussed at board or risk committees pre IPO, then that would amount to a fraudulent omission of the IPO prospectus and could land a lot of people in hot water.. including the bookrunning banks should they have known but not disclosed.

 

This may be a case of watch this space. In terms of the share price, it could rebound based on investor sentiment of longer term earnings. 

 

[old man emu]

My daughter who is a CPA sort of explaine stocks to me. She said that a person buys a share with the expectation that the company will make a profit of some amount and each share entitles the holder to a portion of that profit - the dividend. The share itself represents an amount of money. The amount of money each share is worth depends on how much someone who wants to buy it is willing to pay for it. 

 

The size of the dividend depends on the amount of profit the company makes from providing its product or service. no product is sold, or a service is not taken up, then there is no profit. I recall an old business saying, "No one makes any money until something is sold". It seems to me that some of Musk's businesses don't sell much.

[Jerry_Atrick]

Your daughter is correct in the sense that a share entitles the shareholder to a share of the future profits (earnings) of the business; in proportion to the ownership of the company that represents. It also entitles the shareholder to the same proportion of proceeds available to shareholders in the case of liquidation - which is usually not much once the ATO, secured, and unsecured cr4editors are paid. 

 

Therefore, the share price is a function of the market valuation of the company against the representation of a) the ownership it conveys of the company; b) any special rights or constraints of the class of share (e.g. preferential shares generally give you a right to profits before ordinary shareholders, but as a preferential shareholder you will normally forfeit voting rights); and the future earnings (profit) expectation of the company. 

 

One qualification to the right to profits - it  is only the rights to distributed profits (dividend). If the executive management of the company decide to reinvest every penny of the profit and do not distribute a dividend, then the shareholders are not entitled to any of the reinvestment or withheld profit. 

 

There are companies listed on share exchanges that are non-dividend shares... This is normally in US markets and a far number of them are on Nasdaq. These derive their value from the "intrinsic" value of the business as adjudged by investors, but there is no dividend payable. The price is usually lower on a price/earnings ratio basis versus dividend shares as there is no income returned (which, to me, makes them worthless as anything other than a speculation share rather than a genuine investment share).