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Elon Musk's No-Joke Investment in Tesla Motors

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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Read/Post Comments (4) | 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 January 12, 2014, at 12:09 PM, StanO6 wrote:

    @DanielSparks: +1

    When SpaceX goes public I'm all in!

  • Report this Comment On January 12, 2014, at 12:16 PM, JouniValkonen wrote:

    Stan, indeed, SpaceX may be even more disrupting company than Tesla. SpaceX today's 56 million price tag for space launches are already sending shockwaves through space industry and opens new opportunities that did not make economic sense earlier. But Gwynne Shotwell recently talked that SpaceX is aiming to push launch cost down to seven million. And this could expand the space launch markets by thousand folds from today's levels.

    Even sky is not the limit for SpaceX's growth potential!

  • Report this Comment On January 12, 2014, at 2:07 PM, LawnDartLeo wrote:

    The hitch with future commercialization of space is that earth orbit is becoming a mine field of high velocity spacecraft killing projectiles....

    ... and the day may come when we become trapped here on earth simply because orbital operation will become too risky.

  • Report this Comment On January 13, 2014, at 11:05 AM, mdk wrote:

    There is no doubt that Elon Musk is very smart guy who owns Tesla, SolarCity and SpaceX companies. I am wondering why some analysts are so fascinated and drooling about Elon Musk as if Elon Musk (ELMK) is being traded in Stock Market with all his companies under his name. The fact is Tesla is only one Car Company for now and has sold only 21,000 luxury cars in 2013 as opposed to over 300,000 luxury cars were sold by Mercedes and BMW separately, and hundreds of thousands cars by Toyota, GM and Ford worldwide. All companies have positive profit margins except Tesla with negative margin and its stock being traded unreasonably and way overvalued. I am not sure about the motives why some people called themselves analysts are pushing Tesla stock and some other stocks higher for no justifiable clear reasons. The bottom line is Tesla is a car company with huge competition ahead from luxury industry giants like Mercedes and BMW. If some comparing Elon Musk to Steve Jobs that is impossible. If they are dreaming about future of Tesla, I am sure the other much more established car companies have already begun plans for similar but perhaps much more safer and efficient production.

    My point is to remind regular investors who were around in 1999/2000 and 2008 or are new to the market to take a serious look at the whole situation. Very similar games are played now like in 1999/2000 by hedge fund and professional investors. Some stocks are pushed up 300% to 400% in last year alone as well as Dow, NASDAQ and S&P has gone up over 120% (more than doubled) since 2008, way ahead of economic improvement which has grown only 20% at the best. Still some “analysts” are preaching and pushing market higher in the media for no surreal reason. I recommend everyone who can read the chart, to take a look at Dow’s Max chart in MSN or Yahoo finance and realize where the future of the market is going, down to around 8000. Save your retirement money and investment now and get out if you can. You will be much happier in a year or two.

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Daniel Sparks

Daniel is a senior technology specialist at The Motley Fool. To get the inside scoop on his coverage of technology companies, follow him on Twitter.

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