Hello friends. On Friday something big happened on Wall Street, and I want to use it to explain a term you hear in the news all the time and that nobody ever actually stops to explain.
On Friday, June 12, SpaceX went public. “Went public” simply means that a company that until now was private — owned by a founder and a small, closed group of investors — sells small pieces of itself (shares) for the first time to anyone who wants to buy them on the stock market. From that moment on, anyone can own a tiny piece of the company. And for those who don’t fully know it — SpaceX is Elon Musk’s company, the one that led the revolution in space. They built the first rockets that launch, land back on their own legs, and launch again — which made the cost of flying to space drop dramatically. They run Starlink, a network of thousands of satellites that delivers internet from space to every corner of the world, including places a cable never reached. And on the horizon, Musk’s stated goal: to make humanity a species that lives on more than one planet — meaning, to reach Mars. Whatever you think of the man himself, this company does things that a decade ago would have sounded like science fiction.
So how much is it worth? Friday’s IPO was the largest in history. The stock was priced at $135, and on its very first trading day it jumped about 19% and closed near $161. In a single day, the value of the entire company climbed past $2 trillion — in Amazon’s league, one of the most valuable companies in the world. To give you a sense of it: a company that builds rockets is worth today, on paper, almost as much as the giant store we all buy everything from. Right there, among the analysts, some raised an eyebrow and asked whether the company is really worth that sum. We’ll come back to that question in a moment, because it’s exactly the heart of what I want to tell you.
The First Trillionaire in History — Two Small Words
Because the real headline on Friday wasn’t the IPO itself. It was this: Elon Musk became the first person in history worth a trillion dollars. The first trillionaire. And here, friends, I want us to stop on two small words that almost every article quietly slipped into the middle of the sentence: “on paper.” In my view, those are two of the most important — and most ignored — words in the entire world of money.
Musk holds a little more than 40% of SpaceX. When the whole company is worth over $2 trillion, his slice is worth hundreds of billions — and together with his shares in Tesla and his other businesses, that’s what pushed him past the trillion. But what does it actually mean that “he’s worth” a trillion dollars? It doesn’t mean he has a trillion dollars in the bank. It doesn’t mean he can go out tomorrow and buy a small country. It means something far more fragile, and the easiest way to explain it is with the building across the street.
The Building Across the Street
Picture a building with a hundred identical condos. One neighbor sells his condo for $1 million — a record price for the building. What happens now? All the other owners look at each other and say: “Wait, so my condo is worth a million too.” On paper, the whole building is now worth $100 million. Everyone got richer, without doing a thing, and without a single dollar changing hands.
But now picture all hundred owners deciding to sell in the same week. Suddenly the simple truth comes out: there aren’t a hundred buyers willing to pay a million. There are maybe two or three. To sell all the condos you’d have to drop the price, and drop it again, until enough buyers show up. The million dollars was real for one condo, one buyer, one moment. It was never real for the whole building at once.
That is exactly what “rich on paper” means. Musk’s worth is calculated in the simplest way there is: the number of shares he holds, times the price of the last share that traded on the market. And that price was set by a small number of shares that changed hands in that one moment. The instant Musk tries to sell his slice — 40% of the company — he himself becomes the hundred owners all running to sell at once. There aren’t enough buyers in the world to take that much off his hands at the current price. The more he sells, the lower the price drops. The wealth he is “worth” on paper would evaporate in the very act of trying to turn it into cash.
And there’s a second layer here that deepens the paradox. The market prices SpaceX so high partly because of Musk himself — because he’s the one leading it, and because control stays in his hands. If tomorrow he started selling his shares to “cash out” the wealth, he wouldn’t just be flooding the market with stock. He’d be signaling to every investor that the man they bought the dream for is starting to walk away from it. In other words, one of the things holding up that high valuation is precisely the fact that he isn’t selling. The moment he tries to turn the paper into money, he breaks the very thing that created the value in the first place.
So yes, Musk is the first trillionaire in history. But that trillion isn’t a pile of cash in a vault. It’s a number that exists only as long as nobody touches it. It’s the same gap we came back to here not long ago, in the letter about the Friday selloff: there’s a huge distance between the value of a company and the price someone is willing to pay for it at a given moment. Musk’s worth isn’t money he has in hand. It’s the price someone paid for a tiny piece of what he has, multiplied by a lot.
What This Means for Your Pocket
You’re probably not about to take a company public this week, but this mechanism touches you far more than it seems.
If you own a home: you’re living right inside the example. When you hear that “your home went up $50,000 this year” — that’s true on paper, based on another house that sold on your street. It becomes real money only on the day you sell, and only if a buyer actually pays that price. Until then, it’s a nice number, not a balance in your bank account.
If you hold stocks, a mutual fund, or an ETF (a basket of many stocks you can buy as a single share): the value you see on the screen is always “on paper.” It’s completely real when it comes to amounts you can sell easily, whenever you want. It becomes less real precisely on a day of falling markets, when everyone wants to sell at once and there aren’t enough buyers — exactly like the building where all the owners run for the exit at the same moment.
If you just read the news: the next time you hear that “X got $50 billion richer today” or that “someone lost $30 billion” — take it with a grain of salt. In most cases nobody actually made or lost a single dollar. What moved is the price of the last share that traded, multiplied by the amount they hold. It’s not money that changed hands. It’s a number that changed on a screen.
And for all of us: Musk’s story is the extreme, glittering version of something that’s true for every one of us. Most of us are “worth” more on paper than we have in hand — in our home, our savings, our investment portfolio. That’s not bad, and it’s certainly not a fraud. It’s just important to understand that wealth on paper and wealth in hand are two different things, and that the distance between them reveals itself precisely the moment you try to cross it.
SpaceX has only just opened for trading, and this stock will move a lot — up and down — in the coming months. We’ll see whether the market really keeps believing those two trillion dollars are real, or whether they too, in the end, were on paper.
We shall see.
See you in next week’s letter, or sometime during the week — if I can’t hold myself back until then...