Entrepreneur Elon Musk Broke Again

Great article on solvency and liquidity. Cash is king.

Elon Musk, Paypal and Tesla co-owner, is broke.

Elon Musk broke again after going from rags to riches. PayPal co-founder Elon Musk has been spending a lot of money, so much that he’s broke and asking colleagues for a handout to get by. One might ask how Elon Musk, who also owns electric car company Tesla, could be so broke.

“About four months ago, I ran out of cash,” Elon Musk said in a statement. He’s been spending some $200,000 a month, according to a recent court filing. However, don’t be fooled, the businessman is still super rich because he owns at least 65 percent of Tesla Motors. Tesla is scheduled to hold an IPO in a few weeks that’s likely to value the company at around $1.4 billion.

Musk, who will turn 39 next week, is also going through a divorce. His case is a reminder of the difference between solvency and liquidity: A person (or a company) can be worth a ton of money, yet still face a cash crunch if the assets can’t easily be turned into cash. “My assets are huge,” Elon said.

However, the entrepreneur will soon have cash again, it’s a cycle that business men of his size go through. The economic recession played a big part in his situation because he kept on spending money on new ventures such as rocket ships. Yes, even the rich and famous have to borrow money from family and friends, just to be able to live.

See the entire article here