Elon Musk’s trillionaire status at risk; oil price lowest since Iran war began – business live

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Introduction: SpaceX share price fall hits Musk's wealth

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Elon Musk could soon be down to his last thousand billion dollars, after the share price of his recently floated SpaceX came under pressure this week.

Musk became the world’s first trillionaire this month when SpaceX floated on the stock market. But after a 16% drop in SpaceX’s shares on Monday, Musk’s wealth has declined to $1.1tn.

Monday’s drop alone wiped out more than $152bn from Musk’s net worth, according to Forbes estimates. And most of those who bought into SpaceX since it floated on 12 June are facing smaller losses.

SpaceX’s shares closed at $156 last night, slightly above the $150 at which they started trading on the 12th, but sharply below the record high of $225 set a week ago. The IPO was priced at $135, so everyone who took part is still in the money.

The weakness in the last week has dragged SpaceX’s value down from a peak of about $2.99tn to just over $2tn last night. That’s a fall of almost $1tn, or nearly one Musk.

Danni Hewson, head of financial analysis at AJ Bell, says:

SpaceX might have seemed charmed after its record-breaking IPO and subsequent rally, but it’s come down to earth with a bump over the past couple of days, with shares at one point falling below the opening price on its market debut.

“Post-IPO stocks often enter a period of volatility as the market gets to grips with the new entrant, some investors rush to cash out, and others assess at what price they are willing to jump in.

“For a stock like SpaceX, a lot of decision making might have been emotional and based on the anticipation of huge leaps forward in space exploration and utilisation, but investing should be something treated with clear eyes and patience, even when such huge numbers are involved.

Musk was also hit by a 5.8% drop in Tesla’s shares yesterday, as the tech sector was hit by a broad selloff in AI and semiconductor stocks.

The agenda

9am BST: IFO survey of Germany’s business climate
10am BST: House of Lords Financial Services Regulation Committee hearing on the consumer insurance market
10:15am BST: Treasury Committee hearing on the Financial Services and Markets Bill
Noon BST: US mortgage approvals data
3pm BST: US new home sales data for May

Key events

Oil price lowest since Iran war began

The oil price has dipped to its lowest level since the Iran war began.

Brent crude has dropped by 1.8% today to $75.59 a barrel, as peace talks between the US and Iran continue.

That’s the lowest since 2 March, the first day’s trading after the conflict began, but still above oil’s pre-war level of $72.48 a barrel.

The US secretary of state, Marco Rubio, said yesterday that no country, including Iran, would be allowed to charge tolls for shipping in the strait of Hormuz, signalling that Washington would take a firm line in peace negotiations with Tehran.

Neil Wilson, investor strategist at Saxo UK says a “geopolitical risk premium is being unwound as the deal between the US and Iran sees shipping pass through the Strait of Hormuz”.

Shares in Airbus have dipped by 0.5% this morning after Europen regulators ordered urgent inspections of 16 Airbus A380 planes.

The European Union Aviation Safety Agency issued an emergency airworthiness directive, after cracks were found in a wing component on some aircraft.

The checks will focus on the wing mid-spar, a key structural element inside the wing that carries much of the aerodynamic load during flight.

Fifteen of the affected aircraft are operated by Dubai-based Emirates and one by Australia’s Qantas.

Real estate stocks rally after Segro takeover bid

Shares in UK real estate stocks are rallying broadly, following the takeover approach for Segro.

Land owner and developer Harworth are up 5.6%, while self-storage group Big Yellow has gained 4%.

Oli Creasey, head of property research at Quilter Cheviot, says Prologis’s bid for Segro will send ripples through the UK’s Real Estate Investment Trust (REIT) sector:

Segro may be the biggest fish in the UK REIT pond, but at a market cap below £10bn is a minnow compared to Prologis.

It remains to be seen whether the combination will go ahead - in our view Prologis would be reluctant to increase the offer materially and take it above NAV - but the very fact that it was deemed possible given the company’s pan-European footprint and 460 employees that make it a more complex transaction than its smaller peers means that the entire sector could be back in the shop window for even larger, foreign companies.

Segro rejects £12.6bn takeover bid from US rival

A new takeover battle has begun in the City of London, where UK warehouse landlord Segro has rejected a takeover approach from its US rival Prologis.

Prologis’s approach, which has been slapped down, valued Segro at £12.6bn, or almost 25% more than its value last night.

Prologis says it made its offer on 16 June, and it was “unequivocally rejected” by Segro’s board yesterday.

Segro’s shares have jumped by 15% to 857p each, approaching Prologis’s bid of 925p each.

Segro began as The Slough Trading Company in 1920, when a military repair depot was turned into an early example of a modern industrial estate (there’s a rather fine history of the company here).

It’s business boomed in the pandemic, when demand for home deliveries jumped, leading to increased pressure on warehouse space.

After a stellar run in recent months, technology stocks are under pressure amid growing expectations of interest rate rises.

Those expectations were bolstered last week by the US Federal Reserve, which hinted it could raise borrowing costs before the end of the year.

That would be painful for AI companies who have issued huge amounts of debt to fund their expansion plans.

Indeed, yesterday SpaceX sold $25bn of investment-grade bonds to repay the bridge loan the company took out in March after Musk merged his artificial intelligence lab, xAI, and social media platform X into the rocket company.

That, Bloomberg says, is the final step of replacing the costly debt that had helped finance Musk’s 2022 acquisition of X, and also repaying loans and bonds issued by xAI last year to bridge its rapid cash drain.

Financial analyst Bill Blain of Windshift Capital sees signs that SpaceX could fall further, writing this morning:

Congratulations if you successfully “stagged” out of the SpaceX IPO at the $225 top last week.

Yesterday the reverse-rocket stock briefly broke lower than the $150 post-IPO opening price. The option market is bearish, hinting it could break $100 if the slide continues. There was clearly good money to be made playing the FOMO curve that erupted around the deal, but the secret of any good party is knowing when to bail-out.

The rapid pump’n’dump performance of SpaceX has triggered a reassessment of the whole Tech market’s value. What is real and what is hype in terms of real costs and achievable profits in AI?