I know a majority of Bezos’ and Musk’s net worths are stock ownership. But they obviously would want to make actual cash. So do they just sell a bit of their stocks every year? How do they gain their ownership back then, aren’t they just decreasing their ownership of company stocks? Would they just buy more stocks then? And if so, isn’t that an endless loop of nothing? Sell your stocks to get money, but then buy the stocks back for more ownership of the company?
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They typically have an annual salary, Jeff Bezos makes like 65k annually that Amazon pays him, Elon is like 50k. Occasionally they’ll sell stocks for big purchases like Twitter or a big ass yacht. But they try to have as much invested in stocks as possible because the banks can only insure so much.
They borrow against the stock. Many banks are more than willing to give massive margin loans at low rates. Last year was the first time in years since musk had sold any significant amount of stock.
You sell enough stock to amass your fortune, and immediately diversify that into other investments that can more easily be liquidated (real estate, other stocks, etc.) without hurting their standing in the company.
>But they obviously would want to make actual cash.
Thats not obvious, in fact, they likely don’t need large amounts of cold hard cash.
Second, they often have plenty available in various easily liquidatable assets, while the majority of their wealth is likely in company shares (or other stocks or real estate), they also have PLENTY of money in other places. Shares are volatile, you always keep money in safer places as well, especially if you need it for unforeseen events
On selling shares, generally, high level executives have a lot of regulations regarding how they can trade their shares, but yes, there are times where they may sell shares for various reasons (often to invest in other things, or say, buy a boat).
Lastly, if you’re really really wealthy, you have some other weird options, sorta like an ultra credit card, basically you can take out a loan backed by your stock wealth in cash to pay for expenses. Many very wealthy people have this option on the table and actively do this.
As they have a job as CEO of their company, they get paid huge amounts of money in stocks.
They just liquify the money they need to cover their expenses.
So a few 10-20 million per year or so.
Their expenses are so tiny compared to what they make, it doesn’t even matter.
first, they get huge loans taken out. And you can take out even more huge loans later, to pay off the previous ones. If you have 250 billion, you can take out lots of loans.
Also, they can pay themselves (although that is rare, because it is taxed at a high rate).
They can buy a lot of stuff on the business account (and it’s a tax write-off). You can do that with almost all the stuff they use in their lives, so they don’t need cash barely at all.
Also, they can pay themselves in stocks or stock options. Then sell those. So they don’t have a steady loss of stocks, the core ownership remains.
They have a team of super genius accountants and lawyers, so they can take full advantage of every possible loophole you can think of.
When you’re rich, a lot of people want to give you loans. If you know your company is about to have a breakthrough (in Elon’s case, it’s everyday), you buy the stock with the loans (don’t make it obvious or that would be insider’s trading, and it’s illegal). When the stock goes up, you sell just enough to pay back the loans, and still have plenty to spend without dipping into your original share of ownership.
What makes you say that investors as a general class wants to make “actual cash”. Actual cash is a failure of investment. The investor understands their risk/reward tradeoff and tries to optimize their holdings to match this risk/reward preference.
No billionaire wants to hold a billion dollars of cash. The mindset has got to be forward looking. The idea that the be-all-and-end-all desired state for investors is to hold on to cash is completely wrong.
Founders and executives of public companies cannot trade their shares in that company freely. They are allowed to do so only at particular times and with predeclared amounts. There are also contracts involved that might stipulate how much they must maintain etc. It is far more likely that the Bezos and Musk holdings in their companies will be transferred to some kind of trust fund or organization.
Over the years, they have already diversified their personal assets into many other investments none of which they will likely ever disclose. This is what they probably use to fund their activities.
their actual cash needs are negligible. actually spending a billion dollars is quasi impossible.
they might own a few million dollar mansions, maybe a yacht or 2. Those things might be leveraged anyway, mortgages as we all would.
And yes, they sell small lots of stock to cover the payments. they receive new stock via grants, or corporate buybacks, so their ownership remains consistent.
They mostly dont. Cash loses value. They sell shares when they need to.
Antiwork afficionados and people who dont know much about economy will parrot and repeat what they heard, the usual “they take loans with their shares as collateral”, which is true but certainly not at the scale they think it is, because said stock owners know “stonks dont only go up”.
Dont forget they get paid in stock options too, meaning they can buy stocks at a discount, but said stocks cannot be sold for a certain period of time.
A few months ago, Musk sold a lot of shares just to pay taxes on his exercised stock options.
I am now patiently waiting for armchair economists to explain why he did not “take a loan with shares as a collateral” instead of selling, but I bet all i am going to get for stating facts is downvotes.
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