Elon Musk's No-Joke Investment in Tesla Motors

How Elon Musk nearly lost his entire fortune, and how he's betting big on Tesla Motors.

Jan 12, 2014 at 10:59AM

It's no secret that Tesla Motors (NASDAQ:TSLA) CEO Elon Musk has a large stake in the electric-car company. But just how significant is his bet? Spoiler alert: It's the majority of his fortune. But before he was a Tesla billionaire, he almost lost it all. 


Tesla Model S; photo by author.

Elon Musk... broke?
Rewind to the end of 2008. Despite gaining more that $200 million through eBay's acquisition of PayPal (which he co-founded), Musk had ran out of cash. In fact, he was living off loans from his friends. The details of his dire situation were revealed in a divorce court filing.

So where did all the money go? He poured it into his two start-ups: Tesla and SpaceX. The recession didn't bode well for the two new companies. In an August 2013 Google Hangout, Musk had tears in his eyes when he recounted his tough decision of what to do with what was left of his fortune:

I could either take the money that I had left and allocate it to one company, or two. It's sort of like, you've got two kids and you're not sure if you spread the food around, will both kids make it? It would have been a very unfortunate thing if both companies had failed because I spread what little I had left between the two.

Imagine taking those millions and risking every penny -- that's essentially what Musk did. In hindsight, the investment looks obvious. But at the time it wasn't easy. Musk told Business Insider he was on the verge of a nervous breakdown when both of his companies were about to fail in 2008.

Tesla's largest shareholder
Who owns the most shares of Tesla? It's not a fund. It's a person. It's Elon Musk. Though the final investment of his fortune was split between Tesla and SpaceX, and both companies have fared well since, publicly traded Tesla has served up the biggest gains for the self-made billionaire. Including options, he owns about 27% of Tesla's outstanding shares, according to Forbes. The value of his position is worth approximately $5 billion.

To add some perspective, Forbes estimates Musk's net worth at $6.7 billion. So Musk basically has the majority of his wealth invested in Tesla.

Even more, Musk won't be selling anytime soon. While in Germany about two months ago, speaking about Tesla's plans in the country, Musk told an audience that he won't be cashing out: "I will be the last one to sell shares."

Insider ownership counts
Though critics can discount the importance of Musk's massive vote of confidence in Tesla's future, Foolish investors should take comfort in his major stake.

There's no better way to explain why his inside ownership and his long-term outlook on his position are great for investors than to review Berkshire Hathaway's first two owner's manual principles: 

  1. Although our form is corporate, our attitude is partnership.
  2. In line with Berkshire's owner-orientation, most of our directors have a major portion of their net worth invested in the company. We eat our own cooking.

Because Musk is so heavily invested in Tesla, investors can rest assured that his long-term interests are in line with theirs.

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Fool contributor Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends eBay, Google, and Tesla Motors. The Motley Fool owns shares of eBay, Google, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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