Good, bad and ugly times for some of the world’s billionaires
▶ Elon Musk may have had a tough time after a fatal Tesla crash, but a Russian tycoon had it rougher, ending up behind bars on fraud charges
ELON MUSK
One of the worst weeks in Tesla’s 15-year history has sapped Elon Musk’s net worth and made the moonshot goals underlying his $2.6 billion award seem all the more audacious.
The electric-car maker’s stock has tumbled about 20 per cent since Mr Musk’s record grant of stock options was approved by investors on March 21.
The decline has been fuelled by the fatal crash of a Model X car, a recall of about 123,000 Model S vehicles and a credit-rating downgrade.
That’s dimmed the outlook for the chief executive to collect any of the options, which will vest in 12 increments if goals tied to market value and either revenue or earnings excluding certain items are met. The market-value hurdles start at $100bn and increase in $50bn increments.
Tesla’s market capitalisation fell to about $42.6bn on Monday as shares continued to slide, cutting about $400 million off Mr Musk’s net worth. He’s lost about $1.9bn this year, according to the Bloomberg Billionaires Index.
However, neither Tesla nor Mr Musk are bankrupt yet. The chief executive remains one of the world’s richest with his $18.1bn fortune, and has a full decade to achieve the goals that would trigger vesting of his options.
DANIEL EK
Better times were had by Spotify’s founders Daniel Ek and Martin Lorentzon after the Sweden-based music streaming platform debuted on Tuesday.
Chief executive Mr Ek is now worth $2.4bn thanks to his 9 per cent economic stake in the music-streaming service.
Mr Lorentzon’s 12 per cent holding gives him a $3.4bn fortune following the listing, according to the Bloomberg Billionaires Index.
It took more than three hours on Tuesday morning to get Spotify trading publicly, in a stock sale as unorthodox as streaming digital music once seemed.
Spotify’s shares – sold via a direct listing rather than a traditional IPO – finally opened well after midday at $165.90 apiece in New York, with 5.6m
shares changing hands at that initial price, according to data compiled by Bloomberg.
They closed the first day about 10 per cent below the opening price, at $149.01 each, about 13 per cent more than the $132 reference price set by the New York Stock Exchange based on how the stock traded on private markets before public trading began, valuing the start-up at almost $27bn.
ZIYAVUDIN MAGOMEDOV
In Russia, the arrest of one of the country’s best-connected billionaires on charges of fraud and embezzlement knocked shares in his companies lower and fuelled speculation it could be the harbinger of a shake-up in the Cabinet this spring. Tycoon Ziyavudin Magomedov, who has an estimated fortune of $1.19bn, was arrested on March 31 along with his brother Magomed, who is worth some $450m, and jailed as he prepared to fly to the United States. In court, Ziyavudin denied the charges, but was ordered to be held without bail for two months.
The unexpected legal troubles set off fears among investors that the Summa Group of which he’s a co-owner could be under threat. At the same time, political analysts said his jailing could mean problems for top officials thought to be close to him, in particular Prime Minister Dmitry Medvedev, who faces re-appointment with the start of a new presidential term in May.
“The main immediate problem is the fight over the formation of the new government,” said Igor Bunin, head of the Centre for Political Technologies, a Moscow political consultancy. “Until the Magomedovs’ detention, the most likely scenario was that Medvedev would retain the premier’s post. Chances of that now are falling steadily.” Investors are exiting Summa’s assets amid uncertainty about the future of these
companies, said Oleg Popov, a money manager who oversees $300m of assets at April Capital in Moscow.
“It looks like someone is after Magomedov’s business and this case of course doesn’t increase the appeal of the Russian market.” Summa had been in a long-running conflict with state-owned oil pipeline operator Transneft over control of Novorossiysk Commercial Sea Port. The Dagestan-born tycoon’s wealth surged during the years when Mr Medvedev held the presidency, in part thanks to state contracts.
Mr Popov compared the Magomedovs’ arrest to that of billionaire Vladimir Evtushenkov, who spent three months under house arrest in 2014 on charges of money laundering during a probe of his acquisition of Bashneft, which was later taken over by state-owned Rosneft.
“It looks like a redistribution of property, but it’s unclear who stands behind this case and who wants Summa’s assets,” said Mr Popov. Prosecutors denied any political motivation in the case and Kremlin spokesman Dmitry Peskov said any possible impact on cabinet appointments was speculation.
T ANANDA KRISHNAN
On a lighter note, Malaysian billionaire T Ananda Krishnan is considering selling a tropical-themed holiday resort in Germany as he seeks to focus on his domestic investments, people familiar with the matter said last week, Bloomberg reported.
Mr Krishnan and business partner Colin Au are working with an investment bank to gauge interest in Tropical Islands Resort in Brandenburg, which houses the world’s largest indoor rainforest, according to the people. They have held talks with some potential buyers for the project, which could fetch as much as €300m (Dh1.35bn), the people said.
Tropical Islands Resort, located about 60 kilometres south of Berlin, was built in a former airship hangar and opened for business in 2004, according to its website. Attractions include a rainforest housing 600 varieties of plants, palm tree-lined artificial beaches, a water park featuring a “whitewater river”, a spa complex and a miniature golf course. Its indoor and outdoor facilities stretch across 100,000 square metres, the website shows.
Mr Krishnan is focusing back on his home market after Aircel, an Indian wireless carrier he controls, filed for bankruptcy protection from creditors earlier this year. He is likely to spend more time on Malaysian mobile operator Maxis and pay-TV operator Astro Malaysia, Bloomberg News reported last month. Tanjong, a holding company for some of Mr Krishnan’s leisure and property investments, owns a controlling stake in Tropical Islands Resort, while Mr Au holds the remainder, according to the people. Discussions are at an early stage, and they may not result in a deal, the people said. Mr Krishnan is Malaysia’s fourth-richest person, with a net worth of $5.4bn.
LANG WALKER
Another billionaire involved in the leisure industry is Lang Walker, who made his estimated $2.3bn fortune by developing some of Sydney’s most iconic sites, Finger Wharf and King Street Wharf.
But one of the only things those projects share with his latest endeavour, a private island resort in Fiji, is a nine-figure price tag. “This is the only project I’ve ever really fallen in love with,” said Mr Walker, 72. It’s also the first one he hasn’t seen as a business decision or moneymaker. Instead, Kokomo Private Island Fiji is a passion project. With just 21 villas on the site of an abandoned, halfbuilt Aman resort, all with access to the world’s fourth-largest coral reef, Kokomo is meant as an oasis for Mr Walker’s family that he can also share with the world. It was so personal, in fact, that he eventually multiplied his original $10m budget by at least 10 – a spend that’s rare for a resort so small.
Even before the hotel softopened last year, it was “beyond a ‘project for profit’,” Mr Walker said. “I’m told I can’t go over there too much because every time I have a new idea, that costs money,” he said.
But he is developing the resort with the same eye toward sustainability and innovation he’s used on his company’s latest initiative, Melbourne’s $2.5bn Collins Square. With new food and beverage offerings, a hilltop gym, a spa expansion, and a hydroponic nursery coming to Kokomo this year, he’s evolving the property in hopes that it will join a shortlist of the world’s best resorts. “I’ve done many wild and different things, but never an island, so there was a cheeky I-wonder-what-it’s-like feeling,” said Mr Walker.
“I thought, this’ll be pretty easy – maybe 18 months I can have it up and running. Maybe a budget of $10m,” he said.
But creating a luxury resort on a far-flung island had some serious initial impact: it called for a seaplane, a helicopter, two barges and a fleet of recreational boats to cater to his $7,500-a-night guests. He also added five residences to the original plan, each with three to six bedrooms; spent lavishly on local materials like cinnamon wood; and splurged on unseen details that streamline back-ofhouse operations. By the time Kokomo welcomed its first guests six years later, Mr Walker had invested at least $100m.
“I don’t think I’m ever going to get rich on owning an island in Fiji,” joked Mr Walker. But he’s not worried about that.
“The minute you start putting money ahead of excellence, it doesn’t work,” he said.
“The money side of things follows from all the things you do that add up to excellence.”