Even the richest person in the world can make a bad, impulsive, and emotional investment!
Elon Musk is an entrepreneur and investor, and currently, the richest person in the world with a net worth of around $270 billion dollars. He’s the CEO of Tesla and SpaceX, and a couple of years ago, he purchased Twitter for $44 billion. He then renamed Twitter “X,” and took the company private, meaning that you can’t buy X stock anymore.
Musk had problems with Twitter, which is why he ultimately purchased the company. He didn’t like Twitter’s moderation policies, for one, which he thought was a form of stifling free speech. So, he raised the money to buy the company, and now, owns it.
But, as it turns out, that may not have been a wise investment. A new estimate from Fidelity, which also has a stake in X, has a recent valuation for the X overall. Remember: Musk paid $44 billion for it, which, a couple of years ago, meant that X was worth $44 billion. But Fidelity’s estimate today? $9.4 billion. That’s a markdown of roughly 79%.
Now, this doesn’t necessarily mean that Musk has lost any money – you only make or lose when you sell, this also does not mean that X is, in fact, worth “Only” $9.4 billion. It’s just an estimate of unrealized losses. But Musk has attracted a lot of negative attention to X, and many of its users have left. It’s also chased advertisers away, which is the platform’s primary source of revenue. So, it’s probably fair to say that the company has lost value since he purchased it.
And there’s a lesson in this even for us non-billionaires: Not all investments will pan out. In fact, Musk probably made an emotional or irrational decision to buy Twitter in the first place. He was angry or frustrated with the platform, and perhaps let those emotions get the best of him. He also had the money to spend, so losing some of his investment wasn’t a world-ender for him, either.
A question should be asked about WHY Musk invested into Twitter. He ultimately felt he could change the core of the company, including its name, for what he believed to be ‘the better’. Perhaps this was not a financial decision but more of an altruistic or social decision? Should you put your money into things that you believe will make the world a better place or focus on the fundamentals of the investment?
Think about your investments. Do you make rash, emotional investments based on something you heard or saw? Do you dump a stock if the company does something you don’t agree with? Do you make sure you’re okay with the associated risks of an investment, and remember that your investment could end up being a stinker? Finally, are you trying to make a difference with your investment or make money?
If you are not disconnecting your emotions and trying to act rationally with your investments, you should be.
It’s important to remember that Musk hasn’t lost money yet. X may be worth less than when he purchased it, but those are still unrealized losses — meaning, he hasn’t actually lost anything until he sells. The same is true for gains — you don’t actually make any money until you sell.
While we’re not billionaires, Musk’s foray into social media can be a useful learning tool. Remember to think about your risk tolerance. Remember to do some homework before making an investment, and to think clearly — and not emotionally — about what you’re doing with your money.
Not all of our financial decisions will pan out. But by keeping a clear head, we can make better decisions. Hopefully, that will give us a better chance of reaching our financial goals.
Keep driving!
