There was a brief time when P. Vincent Mehdizadeh ranked among the wealthiest people in Los Angeles, with a fortune valued at more than $1 billion.
“I’m officially a billionaire,” he told the Business Journal in January. “It seems like the Earth, moon and stars are all aligned. Everything that’s happening was meant to happen.”
But the stars have been less kind of late. Since January, when he topped the $1 billion mark, Mehdizadeh’s net worth has been cut down to more like $525 million.
How did he lose hundreds of millions of dollars in just a few months? The same way most of the Wealthiest Angelenos make or break their fortunes: by keeping it all in one place.
His wealth is almost entirely locked up in shares of Medbox Inc., a public company he founded that makes automated dispensing machines for marijuana dispensaries. The stock price surged in January, but has since receded, sending Mehdizadeh’s net worth for a ride along the way.
The ups and downs of many of the super rich on the Business Journal’s list of Wealthiest Angelenos are similarly tied to big holdings in public or private companies. Their fortunes would likely be more stable if they cashed out and put their money in a diversified portfolio, but cashing out of their holdings is no small task.
Folks like Kirk Kerkorian, Michael Eisner and Ray Irani have been on the list – some of them for years – thanks entirely to huge holdings in large public companies. While those holdings have made them extraordinarily wealthy, they come with constraints.
Though shares trade on an open market, major shareholders, board members and executives of public companies – or insiders, in regulatory terms – are subject to rules governing how and when they can sell stock. And they’re also likely to move markets with their decisions to buy or sell. If Elon Musk started selling shares of his Tesla Motors Inc. tomorrow, investors might flee, devaluing the rest of his holdings, said Evan Pondel, president of Century City investor relations firm PondelWilkinson Inc.
“Just because an executive may have significant holdings, it’s not as if they’re going to be able to reap the benefit of the valuation of those holdings,” he said.
Insiders often create plans that govern how much stock can be sold and when. And wealth managers who work with those clients say they trade shares slowly, trying not to flood the market.
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