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?
In: 10
There are a couple ways:
– Many people with lots of net worth tied up in stock of a company they founded, are CEO of, etc. set up regular stock trades to free up cash, be able to diversity their assets, while making sure to avoid even whiff of insider trading. So they might have a standing order to trade 10,000 shares every quarter on the Friday after their earnings call. Of course, they might make one-off sales, too, when they need to pay for their yacht or whatever.
– But these super high net worth people can also borrow against lines of credit that banks will give them, with super low interest rates because of their shares as collateral, and hope to do other more lucrative business with them. So they pull out cash as needed, pay like 1-2% interest on what they’ve borrowed and can keep that running pretty much indefinitely until they choose to settle up, sell some shares and pay the capital gaines taxes. But they may have seen their stock double, triple or more while paying a nominal amount of interest.
Latest Answers