None of the richest people out there are as rich as they say

If you look at the list of supposed richest billionaires out there, it seems like there’s people with hundreds of billions of dollars available to them. But is that true? Do they really have this much money available to them?

Let’s run a thought experiment here. Let’s say one of these billionaires, whose vast fortune is almost entirely in company shares, wanted to actually buy something for $100 billion. Perhaps an insanely expensive futuristic spaceship.

How much cash do they actually have?

They might have a large real estate portfolio, which means they’re have to sell a bunch of properties - something that could take years, especially when we’re talking about luxury real estate.

And then they’d have to sell massive amounts of shares too - which means there would have to be someone on the other side of that deal to buy that amount of shares, at the currently listed price.

What happens when you start selling stock in large amounts? The price goes down. There’s simply not enough buyers at whatever the current market rate is, to purchase $100 billion of Google or Tesla or Microsoft stock.

You’d need to spend a significant amount of time finding investors willing to buy this amount of stock, and they’d negotiate a lower price. Moreover, such deals often involve part-cash and part-stock in the transaction, meaning an investor willing to buy a bunch of your shares might not have enough cash to do so, and might throw in some shares in another company to make up the difference.

It could take months or even years for these billionaires to actually get that wealth in cash that they can spend on something, and the amount is going to be a lot less than what they have listed by just looking at the quantity of shares and current market price.

Thought I’d share this fun fact I realized in the past few months.