The Man, The Myth, The Musk

Caleb Peschke, Editor-in-chief

Tesla this month became the first carmaker to hit an astonishing $1 trillion valuation. Elon Musk was Tesla’s earliest investor and the company’s current CEO. Musk was present at Tesla’s debut in 2006, but he was not in the spotlight then.

Tesla’s original CEO, Eberhard, and another early executive named Marc Tarpenning, who in 2003 dreamed up the idea of naming the company’s vehicles in honor of inventor Nikola Tesla, are Tesla’s original shareholders — the first men to claim ownership of the upstart brand that would go on to shake up the Detroit establishment. It was Musk’s seed capital—the result of an early payday investing in payments processor PayPal—that turned Eberhard and Tarpenning’s vision into a reality. Musk was on a path to take full control of Tesla by steadily raising his ownership stake in a series of nine funding rounds prior to the company’s 2010 IPO, each of which further diluted the stakes of Eberhard and Tarpenning.

Musk has often said he doesn’t care about wealth and sold his Los Angeles mansions last year to live in a humble, prefab box house on his SpaceX campus in Boca Chica, Texas. Nevertheless, he keeps amassing wealth at a remarkable pace. That’s because of an early ownership stake of nearly 20% in the company and a long-term compensation plan announced in 2018 that rewards him with billions of dollars of additional Tesla stock every time it hits quarterly performance targets based on financial and valuation metrics. (He’s also preparing to sell 10% of his stake, worth about $15 billion as of Nov. 9, to avoid a massive tax hit as some long-term options mature.)

Of the five official cofounders, only Straubel, who left Tesla in 2019, is likely to have attained billionaire status from his holdings. His stake may be worth about $1.3 billion, assuming he retains a significant portion of Tesla stock held when he left. Straubel is currently the CEO and cofounder of battery recycling startup Redwood Materials.

Beyond making Musk the world’s richest person, the company that’s become synonymous with a global car revolution has also enriched investors and board members including venture capitalist Ira Ehrenpreis and Oracle’s Larry Ellison, as well as Elon’s younger brother, Kimbal, and countless investors inspired by the potential for a clean energy future.

For all the company’s success in the electric vehicle space and newfound financial stability, as well as the non-stop attention Musk generates, Tesla’s earliest days were marked by a high degree of management and strategic turbulence that left a single cofounder in control. Other tech-oriented giants that attained trillion-dollar valuations, such as Microsoft and Alphabet, created several billionaires among their cofounders, though Musk’s singular financial gains aren’t so unusual.

“While it does seem true that other notable technology firms minted multiple financial winners, a somewhat similar dynamic at Tesla played out at Apple,” said David Hsu, professor of management at the University of Pennsylvania’s Wharton School. “Musk’s rewards today simply flow from a risky early bet that’s paid off big for him,” Hsu said.