Elon Musk likely isn’t done selling Tesla — he still has $7 billion worth of stock options to exercise before August

Tesla CEO Elon Musk stepping out of a silver Tesla wearing a white shirt and black tie on a sunny day
Elon Musk has overseen a huge rally in Tesla’s share price.

  • Elon Musk still has 8 million Tesla stock options to exercise before August 2022, despite his recent selling spree.
  • At Monday’s closing price they’d be worth $7.52 billion, before the taxman took a slice.
  • Yet Musk is set for an even bigger windfall from his huge 2018 pay deal, which could give him 101.3 million options.

Elon Musk has now exercised almost 15 million of the 22.9 million Tesla stock options he was granted in 2012, and he’s probably not done yet.

The Tesla CEO still has 7.9 million left to go before they expire in August next year. If he fires the options up, the shares could net him around $7.5 billion, based on Tuesday’s closing price of $958.51.

But the electric-car maker’s share price has fallen hard in recent weeks, as investors balked at its lofty level, with some concerned by Musk’s recent selling spree. 

Musk — who’s just been picked as Time’s Person of the Year — has been exercising his options at a rapid pace in recent weeks, and has sold large chunks of those shares to meet tax obligations.

Tesla’s closing price on Tuesday was more than 21% below its record high, touched in November. On the other hand, it is still up almost 36% year to date.

The 2012 option grant gives Musk the right to buy Tesla shares at $6.24 — less than 1% of its current value — before the August 2022 deadline.

Even at Monday’s price, Musk could still end up $7.52 billion to the good. It would cost him about $49.3 million to exercise the remaining options, and he could sell the shares for about $7.57 billion.

Yet the taxman would take a chunky slice of those billion-dollar gains: Some speculate taxes could total about 50% or more, because of the way Musk’s salary and compensation is structured.

Musk’s selling spree

On Monday, Musk exercised 2.1 million more options, then turned around and sold 934,000 shares to cover taxes. He has also been dumping some of the shares in his personal trust.

Musk’s overall sales now come to around 12 million shares, which has netted him just shy of $13 billion before tax.

The Tesla boss said in September that he would exercise and sell a “huge block of options” in the fourth quarter, referring to the 2012 grant.

Just before that, Musk put in place a plan to start exercising his options and selling some of the proceeds to cover taxes, according to filings.

In fact, he did this before making waves by posting a Twitter poll asking whether he should sell 10% of his stake in Tesla, the world’s most valuable carmaker.

The 2018 pay deal is even more generous

Once Musk’s accountants have dealt with his 2012 options, their focus will turn to his huge 2018 compensation deal.

In that year, Tesla said it would award Musk 101.3 million options with a strike price of $70.01, as long as he hit various financial targets and stayed on as boss.

Read more: UBS: Invest in these 4 disruptive technologies, which will deliver 16% annual earnings growth and outpace Big Tech titans like Apple and Tesla over the next 5 years

Musk has met those targets faster than thought possible. The company has logged a huge stock-price increase and newfound profitability.

At last count, Tesla had awarded Musk half of the options, which adds up to 50.65 million shares. At a strike price of $70.01, they’d be worth around $45.5 billion, if converted at Monday’s price.

But it’s anyone’s guess where Tesla’s stock price will stand in seven years’ time, or even next week.

“It’s an enormous amount of cash, but it’s worth remembering that when the targets were set, they appeared incredibly ambitious,” said Craig Erlam, senior market analyst at Oanda.

“The share price seems incredibly high — but that has been thrown at companies for years that have gone from strength to strength.”

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Cathie Wood’s nightmarish 2021: Ark Innovation has plunged 24% as tech has crashed, with 6 out of 8 Ark funds in the red

Cathie Wood of Ark Invest
Superstar stock-picker Cathie Wood is having a bad 2021.

  • Cathie Wood’s Ark Invest ETFs have taken a hammering in December as investors have avoided tech stocks.
  • With the Fed set to raise interest rates, suddenly, other parts of the market are starting to look more attractive.
  • Ark’s Innovation ETF is now down 23.7% for the year, and six out of eight of Ark’s ETFs are in the red.

Cathie Wood’s 2021 has gone from bad to worse in December, with her Ark Invest exchange-traded funds tumbling in highly volatile trading as investors ditch unprofitable tech stocks.

Ark Invest’s flagship Innovation ETF has dropped more than 10% in December and is now down a whopping 23.7% for the year – putting it in bear-market territory.

Six out of eight of Wood’s main ETFs are now in the red in 2021. Ark Genomic Revolution has crashed more than 30% and Ark Fintech Innovation is down around 15%.

Wood, the founder and CEO of Ark invest, shot to investing stardom last year. Ark’s selection of ETFs placed big bets on the technologies of the future – from fintechs to 3D printing – and made huge returns. 

Investors were flush with cash from government and central bank stimulus programs and they piled into flashy tech names. Ark’s Innovation ETF returned around 150% in 2020.

Yet many of those tech bets have begun to flop in recent months, as global central banks have started gearing up to turn off the stimulus taps in response to soaring inflation. Concerns about the Omicron variant are also affecting investors.

Many tech companies – especially the ones Wood specializes in – are not expected to become properly profitable for many years. With central banks set to raise interest rates in the next year, the far-off returns these companies offer have started to look a lot less attractive compared to other parts of the market.

Going into 2022, investors will be faced with less fiscal and monetary stimulus supporting the economy and markets, with the Fed removing liquidity by “tapering” bond purchases, Steen Jakobsen, chief investment officer at Saxo Bank, told Insider.

“And that means that high-growth stocks, which is built entirely on low rates and high top-line growth, of course is getting impacted massively,” he said.

Big Ark holdings such as Teladoc, Square and Coinbase have tumbled. Many of Wood’s funds would be doing even worse were it not for her big bets on Tesla, which has jumped more than 40% this year.

A sort of “inverse Ark Innovation ETF” that’s betting against Wood’s stock picks – ticker SARK – has soared more than 20% since launching last month, as many investors have spotted an opportunity.

Read more: Veteran professor Erik Gordon outlines why he doesn’t expect a stock-market crash, calls Cathie Wood a dot-com ‘throwback’ for her grand claims, and warns against owning meme stocks

But despite investors dumping Ark funds, Wood has remained upbeat. She told CNBC last week that it’s the traditional S&P 500 stalwarts that are in a bubble, because they have a less bright future.

“We are not in a bubble. Our strategies would be flying if we were. I think we have not begun rewarding innovation for what’s about to happen and so that’s where our conviction comes from,” she said.

Wood has floated the idea of an “Ark on steroids” fund that would also bet against stocks. And this week Ark is launching its Transparency ETF, designed to track an index of “transparent” companies. Ark Invest did not respond to Insider’s request for comment.

Looked at from a broader angle, things don’t look so bad. The average annualized total return for Ark funds is still around 30% over the last five years.

Saxo’s Jakobsen said he thinks Ark’s funds have a bright future and that investors need to remember their premise.

“The premise of the Ark funds is not to give you an S&P or a Nasdaq performance. It is to buy into the concept that the future has technology embedded into it, and to be part of the future you need to buy a big number of lottery tickets.”

Ark ETF year-to-date returns
Ark’s ETFs have been hit hard this year, with the majority of returns in the red.

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Elon Musk and Jeff Bezos have sold $20 billion of Tesla and Amazon stock this year as insider sales soared to a record high

Jeff Bezos and Elon Musk.
Jeff Bezos (left) and Elon Musk (right) have been selling their companies’ stock.

  • Elon Musk and Jeff Bezos have offloaded $20 billion of Tesla and Amazon stock this year.
  • CEOs and insiders have sold a record $69 billion of their own shares, according to Verity data.
  • Executives are selling in part to profit from record high prices, but also to pay taxes.

Elon Musk and Jeff Bezos have sold just shy of $20 billion of their companies’ shares between them so far this year, as stock sales by CEOs and insiders soar to a record high.

Musk has now offloaded $9.9 billion worth of stock in electric-vehicle maker Tesla, after selling a $1.05 billion chunk at the end of November.

Bezos’ sales have been more under the radar. But the Amazon founder and chairman has now shed $10 billion worth of shares in the e-commerce and cloud-computing leader, according to data from Verity that was first reported by CNBC.

The trades by the two multibillionaires have helped push the total for CEO and company-insider sales to a record $69 billion in 2021, even before the year has finished, the data showed.

Sales are up almost one-third compared with last year’s tally, and are almost 80% higher than the 10-year average, according to investment research and data company Verity, previously called InsiderScore.

The Walton family has disposed of $6.2 billion in Walmart stock this year, while Google co-founders Larry Page and Sergey Brin have each sold roughly $1.5 billion worth of shares in Alphabet. Mark Zuckerberg has sold $4.5 billion of Meta stock.

Most of the stock trades were part of pre-scheduled plans. But Verity said many insiders and CEOs are no doubt cashing in on the dramatic rise in stocks during the pandemic.

The S&P 500 has risen 23% in the year to date, and is up around 95% since the stock-market crash of March 2020, when the pandemic hit. The US benchmark was even higher just a week ago, before the new Omicron coronavirus variant spooked investors.

Tesla stock has climbed 55% so far this year and is up more than 1,100% since that March sell-off as of Wednesday, when it closed at $1,095. Investors are betting that Musk’s company can lead the global green revolution in cars.

“Another factor is the significant increase in the number of public companies over the past few years, thanks to the SPAC craze, and a robust IPO and direct-listing market,” Ben Silverman, director of research at Verity, told Insider.

Company insiders are also selling to cover taxes, Silverman said. Musk in particular faces big tax bills if he exercises stock options that he was awarded in 2012, when Tesla stock traded at around $6.

A good portion of the Tesla CEO’s stock sales so far this year — which began after he posted a Twitter poll asking whether he should offload 10% of his stake in the company — have been to cover taxes after exercising options.

Ark Invest boss Cathie Wood told CNBC Wednesday that Musk “has massive tax bills associated with options and so forth, so he has every right to take profits.”

And venture capital executive Chamath Palihapitiya has said that Musk and Bezos selling stock has made him wonder whether he should also be exiting the market.

“Two entrepreneurs who I’ve considered to be the smartest capital allocators of our generation are taking chips off the table,” Palihapitiya wrote in a recent letter to investors.

He said on his podcast he is “totally confused” about what to do in the market right now, given that assets are at record highs but inflation is rampant.

Read more: A former investment advisor to George Soros finds under-the-radar gems by analyzing the behaviour of corporate insiders. He breaks down the 3 key parts of a strategy that he’s perfected over the last 40 years

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A veteran strategist breaks down why the S&P 500 will soar over 10% to 5,300 by the end of 2022 – and dismisses pessimists like Michael Burry

Stock market trader new york
US stocks have rebounded dramatically from the coronavirus sell-off in March 2020.

  • BMO Capital Markets’ Brian Belski has the most bullish S&P 500 forecast on the street.
  • The veteran strategist thinks it will hit 5,300 by the end of next year, from around 4,600 on Friday.
  • Belski told Insider why and dismissed market bears such “The Big Short” investor Michael Burry.

Brian Belski, BMO Capital Markets’ top investment strategist, went on CNBC in March 2020 and predicted there would be an “epic move to the upside” in US stocks, like “something we’ve never seen before.”

He was right then, and now he’s back with Wall Street’s most bullish forecast for US stocks, predicting earlier this month that the S&P 500 can rally more than 13% to 5,300 by the end of 2022.

At the root of Belski’s bullishness is his belief that company earnings will stay strong, central banks will remain supportive, and that inflation and supply chain problems should cool.

“I believe that next year is going to be another good year because I think people are too focused on inflation. They’re too focused on the negative,” he told Insider this week.

“The fundamental construct of the United States stock market is in wonderful condition. We have the best equity assets in the world, period.”

Belski was dismissive of market bears such as legendary investor Jeremy Grantham and Michael Burry of “The Big Short” fame, who are well known for warnings that stocks are heroically overpriced and that a crash is coming.

There are many “Chicken Little” strategists out there, he said, referring to the folk tale character who warns the sky is falling. Many of them have had the same call for three years, he said, during which time equities have soared and “they’ve missed the entire move.”

Fed tightening shouldn’t hurt stocks

Belski and his colleagues brushed off concerns that stocks will suffer as the Federal Reserve tightens monetary policy, as they laid out the reasoning behind their bullish forecasts in a note earlier in November.

The Fed has already announced that it will trim its bond purchases by $15 billion a month in response to strong inflation, which is at a 31-year high.

But Belski and co. wrote: “The size of [the Fed’s] balance sheet will remain very large for quite some time, which should continue to be supportive of stocks.”

Even if the US central bank hikes interest rates in the middle of next year as expected, equities should still stay solid, they said.

Belski acknowledged that US stocks have historically struggled in the three months following the first in a cycle of interest rate rises from the Fed, with the S&P 500 falling 1.9% on average. “However, the index has done fairly well thereafter, gaining 7.5% on average in the subsequent 12 months,” he noted.

Inflation will cool and earnings will stay solid

In any case, Belski thinks jitters about inflation should cool next year as supply chain kinks get ironed out. BMO expects the US consumer price index to fall from the 6.2% year-on-year rise in October to an increase of 2.4% by the end of 2022.

More important, Belski believes corporate earnings will continue to drive stocks higher. Although earnings growth is set to slow, it’s still growth, he said. The strategist expects S&P 500 earnings per share to increase 17% by the close of next year.

Belski and his BMO colleagues think that given the stellar recent performance of stocks, they are bound to hit some volatility at some point, before resuming their march higher. But they said that trying to time the market is very difficult and that a “stay-invested strategy” is the best bet.

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Anthony Scaramucci says the COVID-driven sell-off is a buying opportunity in stocks and crypto — and calls it a ‘mini March of 2020’

Anthony Scaramucci SkyBridge White House Donald Trump
Anthony Scaramucci runs investment company SkyBridge Capital.

  • Anthony Scaramucci said Friday’s brutal selloff is a buying opportunity for stocks and crypto.
  • Stocks slumped as investors ran for cover after a new COVID-19 variant was detected in South Africa.
  • Yet Scaramucci said the variant may inspire the Fed to be more patient about an interest rate hike.

Friday’s brutal market sell-off is a buying opportunity for both stocks and crypto assets, Anthony Scaramucci of investment firm SkyBridge Capital said on CNBC.

Global stocks and oil prices cratered Friday as investors ran for cover following the discovery of a new, highly mutated COVID-19 strain in South Africa, which has raised the prospect of further lockdowns and travel bans. The S&P 500 was last down 2%, while oil futures dropped more than 10%.

Scaramucci, who was briefly President Donald Trump’s White House communications director, told CNBC’s “Squawk Box” that the Federal Reserve is now less likely to tighten monetary policy as aggressively as it had planned.

“If the Fed is not tapering, this is a buying opportunity,” he said, referring to the central bank cutting back on monthly asset purchases. “It’s Black Friday, and things are on sale.”

The Skybridge Capital boss added that he sees the situation as a “mini March of 2020.” Markets saw a steep sell-off as coronavirus first hit the world economy in the spring of last year, after which stocks rose again.

Scaramucci, a long-time bitcoin bull, said the declines in crypto represented a good chance to scoop up digital assets on the cheap. Bitcoin was last down 7.9% at $54,391 on Coinbase, while ether was down 9.1% at $4,066.

“If you believe in the long-term fundamentals as we do, this is the time to be buying,” he said.

“I just think this is a risk-off situation right now. Bitcoin and other cryptocurrencies being volatile, that’s taking people out of the game. That’s also washing out some of the leverage, which I think sets up a pretty nice first quarter.”

A strong “buy-the-dip” mentality has set in among institutional investors and retail traders alike over the last year and a half.

Stocks suffered their biggest falls since 1987 in March 2020, but huge stimulus packages from governments and central banks have since helped set them soaring. The S&P 500 has roughly doubled from its March 2020 low.

However, the outlook clouded over on Friday as investors were left in the dark as to the infectiousness and lethality of the new coronavirus variant, known as B.1.1.259.

The UK has moved to curb air travel from the affected southern African countries, with the European Union likely to follow suit.

Investors are concerned that the variant could cause the re-imposition of lockdowns and mark the start of another recession for the global economy. Scientists are racing to find out more about the new strain, with few firm details as of yet.

Read more: Top money managers and wealth funds pay to see what hidden gems are on Jon Boyar’s buy list. Here are 3 stocks he says are set to soar at least 38% or more.

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Legendary investor Bill Gross says the euphoria in stocks and crypto assets is a dangerous dreamland

Bill Gross investor bonds PIMCO markets
Bill Gross co-founded bond giant PIMCO.

  • Legendary investor Bill Gross has said investors in stocks and crypto assets are in a dreamland.
  • He told the Financial Times central bank monetary policy is dangerous and is driving euphoria in markets.
  • Criticism of the Fed’s policies has grown louder after US inflation soared to a 31-year high in October.

Famed investor Bill Gross has said ultra-loose monetary policy from central banks has caused worrying euphoria in a range of markets from stocks to crypto assets, saying investors are living in a “dreamland.”

“It’s dangerous,” the co-founder of bond giant PIMCO told the Financial Times, on the subject of monetary policy. “It’s all dreamland that’s been supported by interest rates that aren’t where they should be.”

Gross went as far as to say that the entire financial system could collapse if interest rates are not raised and huge bond-buying programmes are not scaled back, because people will stop saving.

“One of these days, one of these years, or one of these decades, the system will collapse, because capitalism depends on savers saving and investing,” he told the FT.

Gross is now retired, but manages his own money, earlier this year making millions betting against GameStop. He was once known as the “Bond King”, having co-founded the $2 trillion asset manager PIMCO in 1971.

The legendary investor is one of a number of big names in markets to have raised concerns about global central banks’ monetary policies.

US inflation shot up to 6.2% year-on-year in October, its highest level in 31 years, fueling concerns that the government and the Federal Reserve have overstimulated the economy.

Gross’ former colleague Mohamed El-Erian said last week the Fed has made one of the worst calls in its history by dismissing inflation as transitory.

“They got stuck on the narrative and held onto it for too long,” El-Erian told Bloomberg TV. “And the result of which is they’re looking at inflation that is much higher than they ever expected … much broader than they expected … and that’s going to last even longer than they expected.”

Gross said he did not think inflation would stay as elevated as it is currently, but said he thinks it’s likely to remain above the Fed’s 2% target, the FT reported.

Yet he said the Fed may not be able to tighten monetary policy quickly, given the state markets are currently in, with US stocks and cryptocurrencies around record highs.

“I think [Fed chair Jay Powell] is captive to the financial markets, and so he will gradually creep out of buying bonds, and next year he maybe gradually raises interest rates,” Gross told the FT.

Financial markets currently expect the Fed to raise interest rates for the first time in June 2022, according to CME Group’s FedWatch tool.

Read more: A Wall Street head strategist breaks down how the investing playbook used to fight high inflation has changed entirely since the last scare decades ago — and names 4 stocks in the digital realm that fit the bill

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Rivian is now the 2nd most valuable US carmaker after its IPO surge – and its founder R.J. Scaringe is worth $2.2 billion

Rivian employees building an R1T pickup truck
Rivian had one of the biggest IPOs in history on Wednesday.

  • Rivian is now the second-most valuable US carmaker after Tesla, and is ahead of Ford and General Motors.
  • Its stock has surged since its IPO on Wednesday, making its founder R.J. Scaringe worth at least $2.2 billion.
  • The EV startup has only ever delivered about 150 cars and suffered a heavy loss in the first half of 2021.

Electric-vehicle startup Rivian is now the second most valuable carmaker in the US after its post-IPO surge, despite having delivered only about 150 cars.

Its stock has surged since it priced its IPO at $78 a share on Wednesday, when it made one of the biggest market debuts in history, raising $11.9 billion.

The electric-car maker is now worth a whopping $107.4 billion after finishing at $122.99 a share on Thursday, according to Bloomberg data. On a fully diluted basis, which includes options, Rivian is worth $120.5 billion.

It means Rivian founder and chief executive R.J. Scaringe’s stake in the company is now worth $2.2 billion. Scaringe, who’s 38, owns 17.6 million shares, and he could become much richer through stock awards if the Amazon-backed startup does well.

In the US automaker stakes, Rivian ranks behind only Tesla, which is worth $1.07 trillion. It comes above General Motors, which has a market cap of $89.8 billion, and Ford, with a market value of $78.1 billion.

But the differences between the companies are striking. Rivian was founded in 2009, but has only delivered 156 cars, according to its IPO prospectus. It suffered a loss of $994 million in the first half of the year as it spent heavily to ramp up production.

By contrast, Tesla has delivered more than 600,000 vehicles in 2021, and had more than $20 billion of revenue in the first half. General Motors and Ford sell millions of cars per year. General Motors made more than $65 billion in revenue in the first half, and Ford notched more than $62 billion.

Read more: Smaller companies are poised to win as bigger stocks deliver negative returns for the next 10 years, according to Bank of America. Here are 3 places to find the best bargains today.

So far, Rivian has 55,400 preorders for its R1T truck and R1S SUV, which it expects to fulfil by 2023.

However, investors are betting that Rivian can be the new Tesla and will thrive as countries focus on climate change and electric vehicles.

Rivian is a “a legitimate option for institutional investors who have previously only had Tesla to play the electric vehicle space,” said DataTrek co-founder Nicholas Colas, adding that its products are “truly compelling.”

Scaringe is one of the biggest winners from Rivian’s IPO, and he retains 9.5% voting control in the company through class B shares.

The board have also given the MIT PhD grad a time-based equity award of 6.8 million shares and a performance-based option to buy up to 20.4 million shares, meaning he could dramatically increase his wealth.

Although Ford has been overtaken in the carmaker ranks, it was also a big winner from the IPO, having owned 14.4% of the company’s shares before it went public.

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Tesla drops as much as 7% in premarket as Elon Musk weighs up $21 billion share sale following Twitter poll

Tesla CEO Elon Musk in a black suit walks on stage in front of an image of a Model Y vehicle
Tesla CEO Elon Musk is the richest person in the world.

  • Tesla stock dropped as much as 7% in premarket as Elon Musk weighed up a $21 billion share sale.
  • The Tesla CEO asked his Twitter followers on Saturday if he should sell 10% of his stake – and they said yes.
  • Musk has previously floated the idea of selling Tesla stock this year, likely for tax reasons.

Tesla fell as much as 7% in premarket trading on Monday after CEO Elon Musk proposed a sale of about 10% of his gigantic holding of the company’s shares.

Musk on Saturday asked his 63 million Twitter followers whether he should sell 10% of his Tesla stock, and they said he should. He added: “I will abide by the results of this poll, whichever way it goes.”

As premarket trading opened on Monday, Tesla’s stock fell as much as 7% before paring its losses slightly. It was down 4.53% to $1,166.29 at 8.53 a.m. ET.

Musk, who has been Tesla CEO since 2008, owns 170.5 million shares in the electric car company and a 10% stake would be worth around $21 billion.

The entrepreneur has previously said that he plans to sell stock before the end of the year. He told the Code conference in September: “A huge block of options will sell in Q4 – because I have to or they’ll expire.”

Musk likely faces a large tax bill north of $10 billion from stock options he was awarded in 2012 which have since soared in price. He has also taken out personal loans using his shares as collateral.

Read more: 11 Tesla engineers who left Elon Musk’s company to run startups driving the auto industry into an electric future

The Tesla boss tweeted on Saturday: “Note, I do not take a cash salary or bonus from anywhere. I only have stock, thus the only way for me to pay taxes personally is to sell stock.”

Wedbush analyst Dan Ives said: “With a tax bill that we calculate at north of $10 billion, selling stock over the coming months is not a surprise, although holding a Twitter poll to sell 10% of his stock is another bizarre soap opera that can only happen to one company and one CEO in the world, Musk.”

Shares in Tesla have soared in 2020 and 2021 as investors flush with cash due to government and central bank stimulus have bet that the company will lead the green revolution in transport. Tesla stock started 2020 at around $95 but closed at $1,222.09 on Friday.

Strong third-quarter earnings and rental car company Hertz’s announcement that it would buy 100,000 Teslas have helped push the stock up more than 50% over the last month.

The dramatic rise in Tesla’s stock price has sent Musk to the top of the global rich list. He’s now worth $338 billion, according to the Bloomberg Billionaires Index, and has seen his wealth rise by $169 billion over the last year. Amazon founder Jeff Bezos is second, with $202 billion of wealth.

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Peloton sheds $8 billion in value after earnings show the reopening is hitting sales hard

Peloton bike class
Peloton’s stock price has fallen dramatically since the start of the year.

  • Peloton stock plunged as much as 34%, its biggest one-day drop ever, after its fiscal first-quarter earnings.
  • It is struggling as the economy reopens and more people return to gyms and buy competitor products.
  • The exercise equipment company swung to a loss and slashed its sales and subscriber forecasts.

Peloton shed as much as $8 billion in market value on Friday after weak earnings showed that the company is struggling with the reopening of the economy.

The stock fell as much as 34% in its biggest one-day drop ever, taking its market capitalization down to around $18 billion compared to around $26 billion on Thursday.

Peloton was last trading 32.1% lower at $58.29 a share. The stock price peaked above $170 in January.

The exercise equipment company disappointed investors with its first-quarter fiscal earnings on Thursday, reporting a net loss of $376 million or $1.25 a share, compared to a profit of $0.24 per share a year earlier. Analysts had been expecting a loss of $1.07 per share, according to Refinitiv.

It also revealed a gloomy outlook, slashing its forecasts for subscribers and sales. Peloton now expects revenue to range between $4.4 billion and $4.8 billion, compared to an earlier prediction of $5.4 billion.

Peloton flourished in the pandemic, as millions of people in lockdown around the world turned to the company to help them stay fit at home. Sales soared 250% in the first quarter of 2020.

But the company is struggling now the global economy is reopening and people have the option to return to gyms and competitors launch similar, cheaper products. Its stock has fallen more than 43% so far in 2021.

Read more: UBS says to buy stocks in these 4 outperforming sectors as continued earnings growth pushes the S&P 500 up another 8% next year

“It is clear that we underestimated the reopening impact on our company and the overall industry,” Peloton boss John Foley said in a call with shareholders.

James Hardiman, an analyst at Wedbush, said: “The fall from grace for Peloton in such a short period of time is fairly astonishing.”

Peloton slashed the price of its bike in August by 20% to $1,495, but the approach bore little fruit in the fiscal first-quarter. Sales of connected fitness products fell 17% year-on-year to $501 million despite a big jump in marketing expenses.

Foley said: “While the price drop led to conversion rates that exceeded our forecast, overall traffic has not met our initial expectations.”

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The Dow Jones has finally topped 36,000 – 2 decades after a notorious book said it would

A stock trader claps at the end of trade at the New York Stock Exchange
The Dow Jones closed at a record high above 36,000 on Tuesday.

  • The Dow Jones index finally topped 36,000 on Monday – two decades after a notorious book predicted.
  • “Dow 36,000” said the milestone would be reached in the early 2000s, but was way off base.
  • The book advises investors to buy and hold a range of stocks to make lots of money.

In 1999, at the height of the dot-com bubble, two authors published a book predicting the Dow Jones Industrial Average would soar to 36,000 in the next few years – from around 10,700 at the time of publication.

The Washington Post has called “Dow 36,000,” by James Glassman and Kevin Hassett, the “most spectacularly wrong investing book ever.”

But on Monday it finally became right when the Dow briefly topped 36,000, just two decades after the book anticipated it would. Then the Dow finally closed above 36,000 on Tuesday, ending the day at 36,052.63.

Glassman and Hassett said in the book that the Dow Jones should shoot up to 36,000 imminently, but added that it could take as long as five years.

The authors were way too optimistic, in part because they failed to properly reckon with tail risks – the chance that rare events can cause huge losses.

Jim Reid, a top credit strategist at Deutsche Bank, said the book is “a good case study of the heady optimism many had back then.” He said that, “In reality, even the halfway mark of 18,000 wasn’t reached until late-2014.”

The dot-com bubble would pop dramatically in 2000. Since then, stocks have also been convulsed by the 2008 financial crisis and coronavirus, as well as a number of smaller bouts of market nerves.

Read more: Simon Lack’s 98th-percentile mutual fund attacks inflation by picking stocks that benefit from it. He shared ideas for finding inflation winners – and 11 stocks to buy now as prices surge.

Yet behind the eye-popping and extremely wrong title there was another message that looks a lot smarter today: if you buy and hold a broad range of stocks for a long period of time, you’ll make lots of money.

If an investor had bought into the Dow Jones at the end of 1999 and reinvested dividends, they would have gained around 450%.

In fact, famous Harvard economist Kenneth Rogoff praised “Dow 36,000” in the Wall Street Journal in September.

The authors “got something very right” in saying that people with the wealth and liquidity to ride out short- and medium-run volatility will likely make big gains without much extra risk, Rogoff said.

James Glassman Dow 36,000
James Glassman was one of the authors of “Dow 36,000”.

What next for the Dow? There are many reasons for optimism, said Robert Schein, chief investment officer at Blanke Schein Wealth Management.

“Two of the biggest worries for investors – inflation and supply chain troubles – are passing issues that will likely abate sometime in 2022,” he said. “Both monetary policy and fiscal policy are likely to remain accommodative in the near to medium term.”

However, the index has soared more than 33% in the last year and is unlikely to keep up the blistering pace. Stocks have risen so fast thanks mostly to ultra-low interest rates, but the Federal Reserve could hike them next year.

Yet the authors of “Dow 36,000” stick by their by-and-hold investment advice. James Glassman told Bloomberg this week: “I think the current environment is good for stocks, and even if I didn’t, I would tell people to ignore what I think and invest anyway.”

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