Big wins in "gambles"
From 2019 to 2022, almost every "gamble" that billionaire Elon Musk participated in won big. Tesla continued to make profits, its stock skyrocketed after its giant factory in Shanghai (China) increased its operating capacity. SpaceX's rockets also attracted a lot of public attention.
The world's richest billionaire has been given the freedom to experiment and succeed in many fields he has invested in. In 2021, Elon Musk was even named Person of the Year by Time magazine.
According to Business Insider , overconfidence and subjectivity have led to a series of wrong decisions by Elon Musk. It seems that the billionaire's luck has run out and his empire is in a lot of trouble.
This was evident at the New York Times conference, when the billionaire appeared confused by a series of important questions about the future of X, Tesla and SpaceX.
From 2019 to 2022, almost every "gamble" that billionaire Elon Musk participated in won big (Photo: NO.S).
In 2018, the billionaire bet Tesla's future on the Model 3. With an expected starting price of $30,000, the car was supposed to make electric cars more affordable and accessible to even the lowest-income drivers.
The pressure to bring the Model 3 to market is weighing heavily on billionaire Elon Musk. At this time, Musk is active on the social networking platform Twitter, now renamed X. Continuously making arrogant and presumptuous statements has damaged the billionaire's image.
In 2019, a series of executives left Tesla and the company continued to lose money. However, Elon Musk reached an agreement to build a giant factory in Shanghai (China), which helped the car company to be "saved".
However, the difficulties this time are said to be much more difficult to solve. Currently, Elon Musk is facing a debt of more than 13 billion USD that is weighing on X. Tesla's profits are also continuously falling due to a sharp decrease in demand.
Billion dollar deal to buy Twitter
2022 marks the billion-dollar deal between Elon Musk and Twitter. The billionaire began buying shares in Twitter in early 2022 and then offered to buy the entire company for up to $44 billion.
After acquiring this social network, Elon Musk fired most of Twitter's senior leaders and half of its staff, and ended its remote work policy, forcing employees to return to the office.
But Twitter hasn’t been as successful as Elon Musk had hoped. Twitter hasn’t been profitable since 2019, and its business has been struggling amid the economic downturn. Many analysts suspect that Twitter is spending more than it can earn.
Since being taken over by the world's richest billionaire last October, the app has lost about 13% of its daily active users, according to new data from mobile research firm Apptopia.
Since Elon Musk took over, Twitter has lost about 13% of its daily active users (Photo: Reuters).
Elon Musk admitted that X's cash flow is still negative due to a 50% drop in advertising revenue. In addition, the platform also faces competition from many new rivals, such as Meta's Threads.
"After a year of Elon Musk's decisions, Twitter's cash reserves could be running out," Vicki Bryan, CEO of research firm Bond Angle, told Business Insider .
To solve the financial problem, Elon Musk has continuously launched paid subscription packages. Bloomberg estimates that less than 1% of X users currently subscribe to the service monthly, meaning the company's revenue is less than $120 million per year. In addition, with most of the company's content moderation team having been laid off, X now has to deal with a huge amount of fake news.
According to The Times , Musk remains optimistic about the future of the social networking platform. During a company meeting, he said X could become a multi-purpose app with dating and job recruitment services.
The billionaire also revealed plans to turn X into an “everything app,” hoping to generate revenue from shopping and payments features. In October, the company rolled out voice and video calling features and announced plans to launch its own news channel.
The "bloating" debts
According to Business Insider , because of the way Musk operates, X's troubles are a threat to his entire business empire. Despite being one of the richest billionaires in the world, Elon Musk is surprisingly "poor".
Elon Musk does not receive a salary from Tesla, and although he owns about 20% of the company, according to publicly available company documents, as of March this year, about 63% of his shares were pledged as collateral for personal debts.
So if Tesla shares fall below a certain level, banks could call in personal loans, leaving Musk in trouble. But the easiest way for Elon Musk to cover Twitter losses is to sell Tesla shares. And this is seen as a vicious cycle.
Elon Musk borrowed money from SpaceX despite the company losing more than $1.5 billion in 2021 and 2022. The billionaire borrowed $1 billion from SpaceX when he bought Twitter and paid it back within a month, but had to sell $4 billion worth of Tesla stock to do so.
"Elon Musk is taking a risk by using Tesla shares as collateral. A sudden drop in the electric carmaker's shares would cause a lot of strong volatility in the market," Russ Mold, an expert at investment fund AJ Bell, told Business Insider .
In the third quarter, Tesla missed Wall Street's expectations for revenue and vehicle deliveries (Photo: Business Insider).
The US Federal Reserve's (Fed) interest rate hike in an effort to fight inflation has also indirectly caused billionaire Elon Musk's debts to "bloat". Tesla's business prospects have not helped improve the situation.
The company's share of the electric vehicle market has been falling as growing competition prompted Musk to start cutting prices on his cars earlier this year, and Tesla's profits have come under severe pressure as a result.
This became clear earlier this month when Tesla reported its third-quarter results, which missed Wall Street expectations for revenue and vehicle deliveries, and notably, free cash flow fell to $848 million from $3.4 billion a year earlier.
Tesla’s capital expenditures actually spiked to $2.4 billion in the third quarter, and Musk can’t predict when Tesla’s cash crunch will end, or when margins will improve.
Tesla reported that its gross profit margin continued to decline, which spooked investors, who have grown accustomed to Tesla consistently posting high profits.
Experts say price cuts aren’t enough to boost sales. If Tesla wants to stay afloat, it needs to target new customers, ramp up research, and launch a differentiated advertising campaign.
According to Fortune , the largest electric car company in the US is even "revealing its true colors" as a brand that is having difficulty selling products and whose profit margins are increasingly eroding.
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