How Elon Musk, Richest Man In The World, Earned His First $1 Million
Musk's ownership share in electric vehicle manufacturer Tesla and his holdings in SpaceX and the Boring Company are responsible for his startling increase in fortune.
Elon Musk purchased Twitter for $44 billion in October 2022.
Billionaire Elon Musk, who is the founder and owner of Tesla, X.com, SpaceX, and The Boring Company, is ranked as the world's richest person by Forbes andBloomberg Billionaires Index, with a total net worth of $236 billion. Unlike other billionaires and usual investment stories, Mr Musk undertook some risky investment options which ultimately made him the richest private citizen on the planet since 2021.
Mr Musk's ownership share in electric vehicle manufacturer Tesla and his holdings in SpaceX and the Boring Company are responsible for his startling increase in fortune. However, Tesla has been the main source of his wealth, with the company's stock rising by more than 1,100 per cent in the last five years as investors rewarded it for its rise in vehicle sales.
Early Life
According to TIME Magazine, the Musk family was well-to-do. He had an interest in computers and designing at an early age and attended Queen's University in Canada when he was 17. In 1992, he transferred to the University of Pennsylvania, where he studied physics and business. There, Mr Musk along with a couple of friends rented out an off-campus house and turned it into a nightclub business.
Young Entrepreneur
With the advent of the internet, Mr Musk along with his brother Kimbal founded an online business directory called Zip2. They sold the company for $307 million in 1999 to Compaq, a once-dominant computer manufacturing company. He alone made $22 million with the sale of Zip2, and he then spent $1 million on a McLaren F1 supercar, as per the outlet. He then went on to start a banking startup which was merged with another company and ended up being named PayPal, in which he took the role of the CEO. Mr Musk made a huge fortune of $180 million when eBay acquired PayPal for $1.5 billion in 2002.
Setting Up Of Tesla And SpaceX
The billionaire founded SpaceX in 2002 with the mission of "colonising" Mars. In 2003, he launched Tesla with the vision of making electric sports cars. Both businesses had a challenging beginning. As per the TIME report, Mr Musk claims he ultimately invested nearly all of the money from the sale of PayPal in these companies. SpaceX experienced numerous unsuccessful launches that nearly caused the company to go out of business, while Tesla encountered issues once its engineers learned its prototype battery packs were prone to catching fire. Tesla almost went bankrupt during the Great Recession in 2008. The situation improved gradually after NASA made investments in SpaceX and Tesla launched its Model S in 2012, which became a "mass-market" car in the US. According to Forbes, today he owns about 23 per cent of Tesla between stock and options.
Other Ventures
Tunnel-digging firm The Boring Company and the neurotechnology business Neuralink were both founded by Mr Musk in 2016. The former raised $675 million in April 2022 at a $5.7 billion valuation, as per Forbes. He also purchased Twitter for $44 billion in October 2022 and owns an estimated 74 per cent of the company, which is now rebranded to X.
Tesla CEO Elon Musk, ranked as the world's wealthiest person by both Forbes and the Bloomberg Billionaires Index, last year explained that the secret to his wealth is simple: "I own 20% of a company that became very valuable."
Musk, whose wealth is pegged at $240 billion by Bloomberg, hasn't always been at the top of the heap. In early 2020, his wealth was just one-tenth of where it stands today, with his then-fortune of $25.6 billion placing him below the likes of Amazon CEO Jeff Bezos and Facebook CEO Mark Zuckerberg.
Musk's remarkable jump in wealth is linked to his ownership stake in electric car maker Tesla, and to a lesser extent his holdings in ventures including Space X and Boring Company. Tesla, though, has been his primary vehicle for wealth creation, with the company's stock surging more than 1,100% in the past five years as investors rewarded the company for its huge growth in vehicle sales. Tesla's revenue jumped from $12 billion in 2017 to $54 billion in 2021.
"I built these two companies and it was extremely difficult to build them," Musk told the conservative satire site Babylon Bee in December 2021, referring to Tesla and Space X. "Rewarding, too, but massively difficult ... and I didn't sell the stock in the companies."
He added, "My sort of impression was that you shouldn't take money off the table — or stock off the table — that a captain should go down with their ship."
Musk's wealth has ebbed and flowed over the past few years. At his peak, Musk was worth $340 billion, according to the Bloomberg Billionaires Index. That occurred in November 2021, when Tesla's stock price hit a record high of $414.50 a share, according to FactSet. Since then, the car maker's stock has dropped by about one-third.
Tesla stake
Although Musk said he doesn't believe in selling his shares, he has sold billions of dollars' worth of Tesla stock in the past year. One reason for offloading stakes in Tesla: a tax bill on stock options that were set to expire in August 2022, with Musk telling Babylon Bee that he "needed to exercise those options no matter what."
He also sold more stock in 2022 ahead of a court battle with Twitter. As of mid-August, Musk had sold nearly $7 billion worth of shares in the car maker. Musk tweeted that he sold the stake in order to avoid "an emergency sale of Tesla stock" if he loses his bid to cancel his $44 billion acquisition of Twitter.
Currently, Musk's Tesla stake stands at 14.9% of its outstanding shares, an investment that is valued at about $124 billion, according to FactSet.
While Tesla doesn't pay Musk a salary, it has granted him generous options packages for hitting certain performance targets. When adding in options, Musk's stake is worth $176.3 billion, according to Forbes.
SpaceX holdings
Musk's rocket business SpaceX also contributes to his wealth. SpaceX was worth $125 billion in June 2022, with Musk's ownership at about 44%, according to Bloomberg.
That would make his stake worth about $55 billion, although Bloomberg estimates the value at about $47 billion, as it assigns a 15% discount typical of big private tech companies that sell stock in the secondary market.
Boring Company, Twitter
Another $3.3 billion of Musk's wealth stems from Boring Company, which is a tunnel construction company he founded.
Musk also has $3 billion in Twitter stock, according to Bloomberg. He bought about 9% of the business before he made his bid to purchase the company, an effort that has since gone sour and is headed to court. Cash is also a big part of Musk's holdings, with Bloomberg pegging his holdings at about $17 billion.
"I don't have any offshore accounts; I don't have any tax shelters," Musk told Babylon Bee. "I basically have Tesla and SpaceX stock ... everything is extremely transparent."
