Elon Musk managed to break two giant records in the business world on Friday the 12th: launching the biggest initial public offering in history with his company SpaceX and becoming the world’s first trillionaire.
Both achievements were difficult for even Musk to comprehend, considering he had previously said he originally expected the company to fail.
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“It’s really hard to believe that a small company that started in a warehouse in El Segundo is now doing the biggest IPO in history,” he said during an appearance on Nasdaq as SPCX stock began trading on Friday. “And I’ll tell you what: If someone had told me this was going to happen, I would have said, ‘Dude, you’ve got to be tripping.’”
SpaceX began trading at $150 per share and reached $171 per share midday, consolidating his title as the first trillionaire in history, considering his majority stakes in the space company and Tesla.
And while there is a huge difference between being a millionaire and a billionaire, it is even more difficult to understand what it really means to be a trillionaire. Even experienced wealth managers have difficulty imagining how they would manage a fortune the size of Musk’s, especially since it has the power to move markets and exert enormous influence if not kept under control.
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“I would say there are zero qualified financial advisors to manage $1 trillion,” Jake Falcon, CEO of Falcon Wealth Advisors, told Fortune. “If Elon hired me to manage his fortune, I would create a new kind of family office [gestão do patrimônio familiar]”
Falcon said this would mean putting together a structure that is “truly aligned” with Musk’s philosophy and building a team capable of meeting all of his wealth management needs, as well as having the confidence to tell him when he is making a bad decision.
A whole new scale
Managing a trillionaire’s fortune is not simply managing a billionaire’s on a larger scale, TL Turnipseed, head of estate and tax planning at Alta Trust Company, told Fortune.
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While a billionaire typically needs sophisticated investment management, tax planning and a family office, a trillionaire would need “something close to the governance of a private company,” he said.
“Planning needs to simultaneously address control, succession, exposure to creditors, market volatility, public scrutiny, liquidity, philanthropy and multigenerational governance,” he explained.
“The real difference is that the central question is no longer ‘can we increase assets?’ and it becomes ‘can we preserve control and purpose?’ when numbers become too large for conventional planning. The answer is a governance system, not just a portfolio.”
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Evan Mills, associate financial consultant at Scholar Advising, specializing in complex estate planning for ultra-high net worth families, said that trillion-dollar fortunes can really move markets.
“A billionaire may have the risk of concentration in a single company or sector. But, with US$1 trillion, in addition to this concentration risk, any movement the person makes will have a major impact on the market,” he said.
“If it sells shares, it can influence the price of these shares just by the quantity sold. And then there is concern about share control and the possibility of losing control of the company itself.”
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In Musk’s specific case, Mills added, the scrutiny on each transaction further amplifies the risk. “We are talking about Elon Musk, so absolutely every move will be analyzed,” he said.
“Public perception of any decision made by a trillionaire in his business can generate — or will generate — fear among retail and institutional investors.”
The liquidity trap
Having a net worth of $1 trillion also doesn’t mean having $1 trillion in the bank.
“A person has US$1 trillion on their balance sheet, but that doesn’t mean they have high liquidity. How do they actually access that money?”, asks Mills.
“Are you going to borrow using shares as collateral? Then concerns arise about margin risk, lender risk, concentration risk and interest rate risk.”
According to him, debt ends up becoming one of the most useful tools available on this scale.
How Financial Advisors Would Manage a Trillionaire’s Fortune
Falcon said he would keep Musk’s estate planning “very simple and straightforward” at its core, allocating the remainder to projects he is passionate about and speculative bets.
“It would be difficult to invest only in the stock markets, because the operations would literally move the market”, he explained. “Therefore, a large portion of private investment would also be necessary.”
But, according to experts, the biggest work is defensive. Turnipseed said extreme wealth “is a litigation target, a governance challenge, and a tax problem before it is an investment problem. And at this scale, small inefficiencies carry staggering costs.”
“With US$1 trillion, a 1% inefficiency represents approximately US$10 billion,” he said. “That’s why the work starts with protection and structure, not the portfolio.”
The structure he would build would look more like an institution than a portfolio, anchored in trusts created to protect assets, freeze their taxable value and organize who exercises control.
“A trillionaire doesn’t need one more product,” said Turnipseed. “He or she needs a resilient architecture, supported by the right trusts and the right jurisdiction, that protects assets, organizes decision-making, reduces avoidable inheritance taxes, supports philanthropy and prevents future beneficiaries from inheriting chaos.”
The risk that the three experts returned to repeatedly is unique to Musk: the companies that support his fortune are inseparable from the entrepreneur himself. Mills said that’s exactly why succession planning can’t wait.
“Every second of procrastination at this level can create a succession crisis,” he said. Many investors buy shares of Tesla and SpaceX because they believe in Musk’s vision, he noted, and there is no guarantee that either company will remain as successful when the next generation inherits the shares.
“One of the biggest risks embedded in both companies is Elon Musk’s own longevity,” he added.
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