Tesla's Mastermind Loses $1.7 Billion in 3 Days

Elon Musk, the mastermind behind Tesla Motors (NASDAQ: TSLA  ) and co-founder of SolarCity (NASDAQ: SCTY  ) , has become a stock market icon over the past two years, building one of the world's biggest fortunes along the way. But he had a tough week after both companies reported earnings that left investors wondering if he could live up to lofty expectations.

Between the time the market closed on Tuesday and the time it closed on Friday, Musk had lost $1.7 billion. And you thought you had a bad week.

Musk's vanishing billions
Elon Musk still owns more than 25% of both Tesla Motors and SolarCity, so when they go down he loses a fortune. Take a look at just how fast $1.7 billion can vanish:

 Company

Shares and Options

Stock Price Tuesday

Stock Price Friday

Elon Musk's Loss

Tesla Motors

37.8 million 

$176.81

$137.95

$1.467 billion

SolarCity

21.0 million 

$62.77 

$50.18

$265 million

Source: company SEC filings.

Before you feel too bad for Musk, keep in mind that including stock and Tesla options he is still worth about $6.3 billion today. So he won't have a problem making the mortgage.

The cost of high expectations
It isn't as if Tesla Motors or SolarCity is doing poorly, it's just that the market has set incredibly high expectations that neither company may be able to meet.

Tesla delivered 5,500 Model S units in the third quarter, which exceeded its own expectations but fell short of Wall Street's. The real story is that investors realized they've gotten way ahead of themselves. Tesla's going to make only 21,500 this year, and a $17 billion market cap prices in flawless execution. As a result, even great results will cause the stock to sink.  

A similar story unfolded at SolarCity, which met expectations all around but the market decided to focus on earnings guidance being below expectations. Once again, expectations and SolarCity's lofty stock price came back to bite Musk this week.

Musk will be fine
A $1.7 billion loss in three days is tough for anyone, but Elon Musk will be fine. The market has richly rewarded him for building visionary companies, but those high expectations can backfire from time to time.

I'd still be comfortable investing in Musk's companies, even if they had a bad week on the market.

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Read/Post Comments (9) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 09, 2013, at 3:00 PM, StanO6 wrote:

    @TravisHoium: You are new to investing. Let me explain. If you do not lock-in an investment you have not lost anything.

  • Report this Comment On November 09, 2013, at 4:16 PM, rotorhead1871 wrote:

    the nail in the coffin for solar and battery cars is LOW gas prices.....watch gas futures.....as gas goes down in price.....,battery cars will die...solar demand will fade...unless propped up by governments....

  • Report this Comment On November 09, 2013, at 4:20 PM, Elbowpong wrote:

    @ rotorhead - People spending $75,000 to $100,000 dollars on a Tesla model S do not care about gas prices. The car is selling because it's an AWESOME vehicle, not just because it's battery powered.

  • Report this Comment On November 09, 2013, at 10:08 PM, brandonchen wrote:

    How value added is this information? Did you forget the billions hat he has already made? 1.7 b is nothing..

  • Report this Comment On November 09, 2013, at 10:24 PM, bearmarketken wrote:

    Right on, if you are buying 90k car, you don't give a damn on gas. 0-60 under 4 seconds is one of many reasons, not gas lol.

  • Report this Comment On November 09, 2013, at 11:05 PM, mightythor47 wrote:

    Tesla's problems are growing pains. They can't keep up with demand. Most companies would die for that kind of problem. Hold on to your TSLA.

  • Report this Comment On November 10, 2013, at 8:42 AM, LimitstoGrowth wrote:

    Musk is simply betting on a future he believes in by putting his money where his mouth is. He has stated that he believes that we should not wait for demand for oil to hugely outstrip supply before we start to invest in a non fossil fuel dependent transportation infrastructure, Hyperloop anyone? At the opening of the new Tesla store in London, during an interview for the BBC TV's Newsnight, he said to the interviewer, "Mark my word, solar will be the single largest producer of energy in the UK long term".

    I think Musk is much more interested in the progress of his mission to put solar panels on every roof ans an electric car in every garage than the price of Tesla or SolaCity stock at any given moment.

  • Report this Comment On November 10, 2013, at 9:32 AM, MarcAurele wrote:

    Taxpayers: be ready !

  • Report this Comment On November 11, 2013, at 9:37 AM, cliffvettej wrote:

    Taxpayers be ready? Really? We are already on the hook to the tune of a $7500 tax credit to bribe people to buy this $75k commuter car in the first place. Real intelligent. Giving thousands of dollars in tax breaks to the ultra rich. This car should be in business and have to sell their product just like every other car. They are already getting government money to prop up this project in the first place.

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