Near-Arbitrage on Net Worth Markets

I was browsing through some prediction markets, and an Elon Musk net worth market caught my eye. The market was trading between 30-50c, implying a 30-50% probability that Elon Musk’s net worth will reach 800 billion dollars or more by June 30, 2026. Intuitively, this seems very low. For context, Forbes estimates Elon Musk’s net worth at 835.7b, and Bloomberg estimates it at 740b as of May 29, 2026.

The market uses Bloomberg’s valuation for resolution, and with the SpaceX IPO on the horizon which will force Bloomberg to mark Musk’s stake at full market valuations, these odds seem extremely underpriced.

The question is: how mispriced is the price, and can we structure a trade that captures the mispricing while hedging out the residual risks?

How Bloomberg Values Private Companies

Before we can hedge, we need to understand how Bloomberg comes up with its valuation numbers, since that’s the resolution source.

Both Forbes and Bloomberg mark publicly traded stocks at market price. They diverge on private companies:

• Forbes: sources valuations from private-market brokers Forge and Notice.co.
• Bloomberg: uses the valuation from the latest private funding rounds and applies a 5% liquidity discount.

This distinction matters enormously. Bloomberg’s number is mechanically tied to specific observable events (funding rounds, mergers) rather than secondary market transactions.

Here’s my best reconstruction of the Bloomberg net worth calculation:

This spreadsheet is editable! Feel free to play around with the values.

You might ask, why is it important to reproduce the same numbers as the valuation calculated by Bloomberg? It is important when we hedge.

Identifying the Right Hedges

Hedge 1: SpaceX Valuation Floor

The most obvious way to hedge is to bet that SpaceX valuation won’t go down below a certain price.

Assuming all other valuation numbers stay the same, SpaceX’s valuation needs to be above given an IPO:

\[ \frac{800 - 205.2 - 5.1 - 5.9 + 3.5}{0.44} = 1335 \text{ billion} \]

Looking at the available SpaceX valuation markets, Will SpaceX’s valuation hit __ by June 30? is very close to what we want. Other valuation markets only concern of SpaceX’s valuation at the time of IPO, which is not what we want since the valuation can drop after the first trading day.

Clauses in the market rules which seems to satisfy our hedging needs:

If the company completes an IPO or direct listing before the end of the specified period, this market will consider, in addition to the relevant NPM valuations published between market creation and the IPO or direct listing date, the valuation implied by the official IPO or direct listing price, and the company’s public market capitalization between the IPO or direct listing date and the end of the specified period.

Public market capitalization will be determined using the highest/lowest official regular-hours trading price published for the company’s primary listed common equity on its primary exchange for any trading day during the specified period, multiplied by the company’s total outstanding common shares at the relevant time.

Fortunately, we have the exact bet we want with a 1350b strike only trading at 14c at the time.

There’s still one thing we are missing… What happens if the IPO doesn’t happen by June 30?

Hedge 2: SpaceX IPO Timing

SpaceX is slated to IPO on June 12, however it is not of 100% certainty. If an IPO doesn’t happen by June 30, Bloomberg won’t update its valuation which would be catastrophic. To mitigate this risk, we also need to buy SpaceX IPO hedge. Fortunately, there is a market listed that gives us the payoff profile we need to hedge this risk. Betting against an IPO before June 30 is priced at 5c.

Hedge 3: Tesla Tail Risk (Acknowledged but Unhedged)

It can be theorized that Tesla and SpaceX will trade with a high degree of correlation as they are both run by Musk. Musk’s stake in SpaceX is also significantly larger than Tesla so fluctuations in the Tesla stake are less impactful.

It is possible to hedge by buying bets against Tesla stock price, but these markets have almost no volume.

We can calculate how much Tesla market cap would need to drop while SpaceX’s valuation remains 1350b:

\[ \frac{800 - (1350 \times 0.44) - 5.1 - 5.9 + 3.5}{0.152} = 1306 \text{ billion} \]

However, this is unrealistic since at a 1350b SpaceX valuation, the valuation hedge is worth nearly 100c. More realistically, you would need to peg SpaceX’s valuation at ~1450b:

\[ \frac{800 - (1450 \times 0.44) - 5.1 - 5.9 + 3.5}{0.152} = 1016 \text{ billion} \]

Implying a <$330 Tesla share price. You can see the corresponding market has no reliable price due to lack of volume, but the lowest price listed yet is 6c:

Composing the trade

Buying an equal number of shares of

• “YES” Musk net worth 800b+ on June 30
• “YES” SpaceX valuation hits 1350b by June 30
• “NO” SpaceX IPO by June 30

will cost ~55-65c with a high degree of certainty of a 100c payout. While not truly an arbitrage, it is almost as close as it can be.

Here’s the payoff matrix of the trade:

We can graph the prices to visualize the discount:

When the total cost <100c (you might add a buffer, say <90c), it makes sense to make the trade. Currently, you can see that the total cost is above 100c, why is that so?

The hedges are likely to embed some volatility premium. To ensure trading costs stay low, it might make sense to keep the hedging bets and trade in and out of the net worth bet.