Elon Musk became a trillionaire on Friday – but his new status remains entirely dependent on the market, warns Bloomberg. The milestone came after SpaceX, his rocket and artificial intelligence company, pulled off the biggest initial public offering in history, raising $85.7bn, not the $75bn initially thought.
The extra $10bn – which by itself would rank as one of the biggest IPOs – was the result of a financial mechanism called an overallotment option, more commonly known as a "greenshoe" option. The banks handling the listing – Goldman Sachs, Bank of America and JPMorgan – exercised the clause in full, purchasing an additional 83.3 million shares directly from SpaceX to meet extraordinary investor demand.
“SpaceX IPO raised $85.7bn, $10bn more than thought, making Elon Musk a trillionaire.”
When a company goes public in a highly anticipated listing, demand can outstrip the initial supply of shares. A greenshoe agreement lets the underwriters sell more shares than originally planned, preventing wild price swings and ensuring a smoother launch. In SpaceX's case, appetite was exceptionally high.
The shares were first offered to investors at $135, valuing the company at $1.8tn. By Monday, they had surged more than 19% to $192. Musk told employees the $75bn originally raised would be spent funding a "significant growth phase".
But since the vast majority of Musk's wealth is tied up in SpaceX equity, his new trillionaire status is precarious. A sharp decline in the stock could strip him of the title just as quickly as continued gains could multiply it. Analysts have warned that the sky-high valuation leaves little room for error, raising questions over whether the loss-making company can sustain its current growth amid growing regulatory scrutiny and rising competition in the commercial space sector.