Elon Musk overtakes Mark Zuckerberg to become world's third-richest person

The net worth of Tesla's founder increased by $87.8bn so far this year on the back of his stake in the car maker

Elon Musk is now the world's third-richest person, according to Bloomberg's Billionaires Index, after more-than six-fold increase in Tesla's valuation this year, added $87.8bn to his net worth. EPA

Elon Musk became the third-richest person in the world on Monday, overtaking Facebook founder Mark Zuckerberg, after a split in Tesla’s stock sent its share price soaring.

Mr Musk is now worth $115 billion (Dh422bn), overtaking Mr Zuckerberg's net worth of $111bn, according to the Bloomberg Billionaires Index.

Last month, Mr Musk became a centibillionaire after stocks rallied following news that the Federal Reserve is likely to keep short-term interest rates near zero for at least five years.

His net worth has increased by $87.8bn so far this year, boosted by the rising value of his electric car company, which has soared by more than 500 per cent since the beginning of the year.

Tesla shares jumped by more than 12 per cent following a five-for-one stock split by the company on Monday, and are up a further 7 per cent in pre-market trading on Tuesday.

The electric car maker now has a market capitalisation of $464bn, more than double the $182bn valuation attached to the next-highest valued automotive company, Toyota. The Japanese company sold 10.7 million cars in 2019, compared to Tesla’s 367,500, although Tesla has made significant investments in other areas such as self-driving technology.

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Theoretically, stock splits should not alter a company’s valuation – increasing the number of shares reduces the price at which they trade, but makes no fundamental difference to its operations.

However, a lower share price makes it easier for retail investors to buy and “gives a psychological boost to the market”, analyst Craig Irwin of Roth Capital told CNBC on Tuesday.

“It brings momentum and liquidity into the [the company’s shares] in a greater velocity. There’s no denying it – the velocity in Tesla is straight up and this adds more rocket fuel to that rocket,” he said.

Following Monday's stock split, Daniel Ives, an analyst at Wedbush Securities, set a price target of $380 on Tesla’s stock, with a Neutral rating. It closed on Monday at $498.32

“We believe the stock split decision was a smart move by Tesla and its board given the parabolic move in shares over the past six months,” he said in a note to clients.