How much physics helped Elon Musk in creating his companies?

[Grands]

I'm really not sure why this is so hard to understand: he created those companies basically from nothing. That's why he's the most important person in them and that's why he's made so much money. On a nuts and bolts level, the money comes from being the largest shareholder: the other investors gave the company money, which is to say, they paid him.

I understand that he made lots of money with Paypal, but I don't think that he earned the 15 billions he have today.
In this link you can see that in the Paypal team there were lots of people. https://www.google.co.uk/search?q=e...g#imgdii=QdJRphTMlYiQMM:&imgrc=Njx4JM7C_w5-1M:
This mean that the total earned money was divided in more parts.

 

[mfb]

I understand that he made lots of money with Paypal, but I don't think that he earned the 15 billions he have today.

I quoted the amount he made with PayPal in an earlier post already.

This mean that the total earned money was divided in more parts.

That‘s not how companies work.

Consider SpaceX, where we know the numbers. Musk founded it with $100 millions of his own money and convinced some others to contribute money as well. As largest investor and CEO he owned a big majority of the company, the rest belongs to other investors. The company hired engineers and paid them salary. They don’t own any part of the company, they just get paid for their work. They developed a rocket and tested it until it worked - luckily before the company ran out of money. After the first successful launch Musk asked more people if they want to invest in SpaceX to get some share of the company - and found them. The company also got a big NASA contract - a lot of money for SpaceX. With that money they developed Falcon 9 and used it for NASA and also for commercial satellite launches. A few more rounds of investments later (again to get more money to expand) and the company has now the largest market share worldwide. Musk still owns about half of it - but the company that initially had a value of about $100 millions is now worth $20 billions. Everyone who invested early had a high risk, but made a lot of money now. This only applies to investors, not to employees - although it is typical to give them (tiny) shares in the company as part of their salary.

 

[Grands]

Ok, so when google says that musk has 19.3 billions, that means that this money are just part of the company and not cash money?

 

[russ_watters]

Ok, so when google says that musk has 19.3 billions, that means that this money are just part of the company and not cash money?

Right: almost all is in stocks.

 

[Grands]

So if tomorrow SpaceX or Tesla fails, he can lose about 10 billions in a single day?

 

[Greg Bernhardt]

So if tomorrow SpaceX or Tesla fails, he can lose about 10 billions in a single day?

It's the case for most billionaires. No one has billions in liquid cash. It's all tied up in investments with various liquidity levels.

 

[Grands]

It depends, if someone has 1 billions in gold or houses they can lose all the money in one day, like Musk?

 

[Greg Bernhardt]

It depends, if someone has 1 billions in gold or houses they can lose all the money in one day, like Musk?

We don't know Musk's portfolio so who knows. Needless to say if Tesla fails he will be hurting, but I'm sure he has stashed plenty in other places.

 

[Grands]

Here there is another thing that I don't understand, Musk has that money in stocks, but we all know that stocks change their value daily.
Why the value of the stocks change everyday?

 

[Greg Bernhardt]

Here there is another thing that I don't understand, Musk has that money in stocks, but we all know that stocks change their value daily.
Why the value of the stocks change everyday?

Depending on the details of the company for that day people either think the company is worth the same, more, or less. The price reflects that.

 

[Grands]

So if a rocket of SpaceX explodes and people start to find that SpaceX is not a good company, Elon could lose billion in a few seconds ?
Why the opinions of people count so much?

 

[Greg Bernhardt]

So if a rocket of SpaceX explodes and people start to find that SpaceX is not a good company, Elon could lose billion in a few seconds ?
Why the opinions of people count so much?

You make some assumptions, but theoretically you are correct and it happens all the time. The stakes are high for publicly traded companies.

Here are a couple quick reads
https://www.investopedia.com/ask/answers/133.asp
https://www.investopedia.com/articles/fundamental-analysis/09/elements-stock-value.asp

 

[Grands]

How can the opinion of the people be analyzed second by second and put in a graph that represent the value?

 

[Greg Bernhardt]

How can the opinion of the people be analyzed second by second and put in a graph that represent the value?

The stock price expresses the opinion

 

[Grands]

I get it, but how can the opinion be caught by a computer?

 

[Greg Bernhardt]

I get it, but how can the opinion be caught by a computer?

People or computers make the trades and the stock trackers record it

 

[Grands]

So it is referred to the fact that people buy stocks at a certain price?
In the past, when the computer wasn't something for everyone, what happened?

 

[Greg Bernhardt]

So it is referred to the fact that people buy stocks at a certain price?
In the past, when the computer wasn't something for everyone, what happened?

You had a stock broker you could call to make the trade who had connections to people on trading floors.

 

[Grands]

You had a stock broker you could call to make the trade who had connections to people on trading floors.

And there wasn't no mobile phone?

Anyway how start everything, who decide that there is a stock that can be sold?

 

[mfb]

SpaceX is not publicly traded. The estimate of its value comes from the last round of fundraising. If people pay 210 millions for a 1% share, the company has an estimated value of 21 billions.

If either SpaceX or Tesla suddenly lose all their value (very unlikely), Musk would lose roughly half of his net worth, yes. If both companies do he would lose most of it. Certainly not everything - he’ll have some other investments as well. It would be stupid to put every single dollar into just two companies.

While it is rare, some people did lose (and win) more than a billion in minutes in the past.

Before there were mobile phones people had landlines and telegraphs. And before that trading was much slower.

 

[Grands]

Ok but how start the price price of a stock?
Let's suppose that a new company is founded, who is interested in buying stocks, and who decide how many stocks the company have?

 

[mfb]

The process is called initial public offering (IPO). The price is set by the company. Too high and no one wants to buy shares, too low and you don't get as much money as you could. But the price is then quickly determined by the trade between shareholders.

 

[Grands]

And who decide how many stocks a company has?

 

[NTL2009]

And who decide how many stocks a company has?

@Grands , you've really been all over the map in this thread. From Does Musk use physics, to does he deserve the money, to how he got it, and now the structure of a company and how it's stock is valued, issued, etc.

I think you would be better served by stepping back and reading some sources on basic business fundamentals. It's tough to learn with specific questions w/o first learning the fundamentals.

It would be like trying to learn how a computer works by having a disassembled computer in front of you, and picking up a random piece and asking someone "what is this for?". The answers would not be very helpful if you did not know a bit from a byte, how addressing works, how a computer uses RAM, ROM, etc.

 

[Grands]

This was my last question about the finance side, because I never studied economics at schools, I don't know if in the US at high schools there are lesson of economics.

 

[NTL2009]

This was my last question about the finance side, because I never studied economics at schools, I don't know if in the US at high schools there are lesson of economics.

Not much in US High Schools I think (but that was long ago for me). But there is a wealth of information outside of school - libraries and the Internet. And of course, asking questions on forums like this. But I do think learning from the fundamentals up will answer those questions, and then you could ask for help in specific areas you don't understand.

 

[Grands]

I tried to search on goggle that information, I only found that companies can collect or divid their stock, but I didn't find anything related to how many stock a company has in the first day.

 

[NTL2009]

I tried to search on goggle that information, I only found that companies can collect or divid their stock, but I didn't find anything related to how many stock a company has in the first day.

Google "IPO" or "Initial Public Offering"

 

[Grands]

In the US is quite common for people that doesn't have a major in economics buy stocks?

 

[mfb]

This was my last question about the finance side

In the US is quite common for people that doesn't have a major in economics buy stocks?

I agree with NTL2009, this approach isn't really helpful.