I was chatting to some friends on Signal, and ended up with a too-long reply. I saved it here. These are my raw thoughts, untainted by AI editing!
I was trying to think of an analogy for Musk's wealth. I thought about talking about an ordinary person, owning a modest house, and selling a share for £100. The share would entitle the holder to receive one ten-thousandth of the value of the house, when it was next sold. In principle, the owner of the house could argue that he's now worth ~£1M, because he owns 10K * £100.
But then I decided that this is not a good analogy, because the seller of the share still owns a house, which is easily valued by looking at what the house next door sold recently. I think that the asset is more like a lottery ticket, with a huge payoff, but a very uncertain probability of winning: a known prize, but payable only once enough tickets have been sold to fund the prize. For the ticket to be valued, on has to make a calculation of the operator's skill in selling tickets, and on the willingness of the general public to keep buying the tickets, whatever alternative options are available.
Even the lottery analogy is not quite right, as SpaceX does have a business: in fact a rag-bag of businesses which, in aggregate lose money, and depend heavily on contracts with the US govt.
Note that, as usual with IPOs over the last few decades, this one is nothing to do with raising capital. It's purely about insiders exiting their shares, most of which were acquired at a tiny fraction of the IPO value. The whole of Wall Street is insiders: banks, private equity houses, private credit, investment banks, ETFs like Cathy Wood's ARK, all stand to cash in from a successful launch. All brokers stand to make money from rapid turnover. The whole industry is going to get rich from the IPO, so they are going to make it look appealing to retail investors (or 'bagholders' as they are more commonly referred to).
The fact is that Musk can afford to manipulate the shareprice of SpaceX longer than short-sellers can remain solvent. Now the IPO has happened, he can use his controlling stake in SpaceX as collateral for loans. With these loans he can make exquisitely timed purchases of 'zero day expiry' call options, which act as a sort of rocket fuel for the price of the underlying equity. (This is because of their so-called 'convexity', where as soon as the price starts to go up, option market makers have to start buying the underlying stock to hedge their risk. The whole thing is a positive feedback loop, which can pump the stock higher at very little cost.) Musk (or, presumably, a very well-paid team of experts) has got this down to a fine art, and has managed to keep Tesla's share price absurdly high for a very long time.
At some point, the whole edifice will come down, but I think it won't happen until the whole stockmarket turns decisively down. This won't happen for a long time, because the whole world seems to have decided that US equities will always outperform those from anywhere else, and because most investing is now 'passive': i.e. investors just buy the index, and never look at earnings or any traditional measure of equity value, and because for years net issuance of equity for the SP 500 has been negative ($1T in 2024). This means that companies are constantly buying back shares (often funded with private credit), because CEOs usually have bonus awards tied to share price performance, and the easiest way to boost your share price is to borrow a lot of money and keep buying your own shares back.
Like Herb Stein said, if something cannot go on forever it must stop. But I've been waiting for this to stop for several decades, and I don't see it stopping any time soon.