Background Information
Elon Musk is a popular businessman, entrepreneur, and CEO. He’s an innovator who has founded and led several successful ventures including Tesla Motors, The Boring Company, SpaceX, and SolarCity. Musk has been listed among the world’s most influential people and has been cited as the most successful innovator of his generation. His innovative achievements are remarkable and include launching reusable rockets into space, developing fully electric cars, and pioneering advancements in solar energy and sustainable energy solutions. Forbes estimated his net worth in 2021 at 179.3 billion USD, making him the second-richest person in the world.
One of Musk’s most impressive and lucrative business endeavours has been generating wealth from stock and securities. According to the United States Securities and Exchange Commission, Musk has sold Tesla shares worth more than 164 million dollars over the past decade. Over the same period, he sold shares of The Boring Company for around 10 million dollars. However, the vast majority of his wealth has been generated from selling Tesla stock worth over $134 million dollars in 2020.
Data and Perspectives from Experts
According to the data analysis firm S3 Partners, Musk has sold nearly $1.039 billion of Tesla Inc. shares in the financial year ending 2020, which is a new record. His stock-based selling is structured to bet on the long-term success of Tesla, so much of the proceeds were diverted to pay taxes. The sales are also intended to fulfil delivery requirements of Tesla options exercise agreements and other contractual obligations. Musk has previously stated that he has no intention of selling his Tesla shares, making his stock sales all the more remarkable.
Industry experts such as online investment researcher Robinhood believe that rather than selling out of the company, Musk has been cleverly manipulating Tesla’s stock. As the company’s chairman and CEO, Musk’s social media presence and public appearances have made him an influential figure in the industry and impacted the movements of Tesla’s share prices. Through savvy use of social media and its influence, one could argue that Musk has artfully utilized his power to benefit Tesla’s stock prices and his own profit in the process.
Insights and Analysis
In August 2018, Musk shocked the world by announcing a tweet of himself “considering taking Tesla private” alongside a $420 price tag. This prompted a stock price surge, spearheaded by Musk’s loyal followers and believers. S3 Partners estimated a whopping $1.16 billion dollar value of Tesla stock sold that same day. This was seen as an organized capital manipulation that later cost Musk $20 million as a penalty in a settlement with the U.S. Securities and Exchange Commission.
It appears that Musk is a strategic and calculated entrepreneur who has leveraged his power to benefit both himself and those who share a vested interest in his businesses. His ability to move the market and understand its potential has helped him to proactively capitalize on any given opportunity, no matter how small. While the value of his stock sales is significant and investors should bear witness to the market moving potential that Musk can have, it is clear that he has made many shrewd decisions to benefit both himself and the overall well-being of his companies.
U.S Securities and Exchange Commission (SEC)
The SEC is the primary regulator of the securities industry in the United States. In 2018, the SEC formally charged Musk with securities fraud concerning the tweet about taking Tesla private. They required Musk to pay a fine of $20 million and step down as Chairman of Tesla, in a move that was criticised by Musk as “unjust.”
In May of 2020, the SEC charged Musk a second time, this time concerning inaccurate tweets he made in February of that year that exaggerated Tesla’s potential production capacity. This time around, the SEC required the company to put procedures in place to “monitor Tesla executive communications” and prohibited Tesla from making any public statement without regulator approval.
ML Sullivan, a Senior Vice President at the Ameriprise Financial Center, believes that governments around the world should implement measures to penalise and regulate the use of social media and its influence. This was echoed by the SEC Chair Jay Clayton who said in his 2020 statement that the SEC “will not hesitate to bring an enforcement action when our rules are violated,” to ensure robust monitoring of corporate social media accounts. Although the SEC has yet to implement these measures, their presence is likely a sign of what will come in the near future.
The Boring Company
The Boring Company is Musk’s infrastructure and tunnel construction business and is most famous for its Las Vegas tunnel system. It has several projects across the US, such as Chicago and LA, as well as high-profile international projects such as a link for the downtown Las Vegas to the Las Vegas Strip.
Throughout his time as CEO, Musk has sold shares and stocks of The Boring Company to bring in more capital and to fund various projects, such as the Hyperloop. In an interview with Bloomberg, Musk revealed that he has been quite successful at selling stock of The Boring Company and has earned more than $10 million from it so far. As of February 2021, The Boring Company had raised $845 million for its operations and activities.
SolarCity
SolarCity was founded by Musk in 2006 and was later acquired by Tesla in 2016, making it part of the Tesla family. SolarCity, now Tesla Energy, is a leader in rooftop solar and provides affordable, solar-energy installation, leasing, and maintenance services.
In 2015, Musk began to sell SolarCity in what can only be seen as a strategic move to fund the acquisition of Tesla Motors in the same year. He sold SolarCity shares totaling $107 million over a period of seven months while maintaining a 23% stake in the company. That same year, SolarCity sold additional shares earning $227 million, making SolarCity the third biggest seller in the NASDAQ Composite in 2015.
SpaceX
SpaceX is a pioneering aerospace contractor and transport services company founded by Musk in 2002. It launched the Falcon 9 rocket and has been part of several innovations such as reusable rockets, pilotless spacecraft, and winning bids for launches of satellites into space.
In 2018, Musk earned about $4 million through the sale of SpaceX’s Series I preferred stock. The raise was also intended to help fund Musk’s Falcon Heavy rockets and other projects. To date, Musk has earned a total of nearly $40 million from SpaceX stock sales while maintaining a majority stake in the company.
IPO of Tesla
Tesla’s initial public offering (IPO) changed the gaming industry in 2010. In the years preceding the IPO, Musk had invested $70 million of his own money plus additional funds from investors and loans, turning Tesla into a success. Tesla’s shares soared as traders anticipated Musk’s abilities and forecasted tremendous growth in the years to come.
Due to the successful launch, Musk and his investors shared in the funding activities and it has been estimated that Musk earned about $1.4 billion from the sale of Tesla stock by the time he sold off his last shares in the summer of 2018.
Taxpayers Money
Musk has been incredibly successful in creating companies that he can sell stock from and from which he has gained considerable wealth. But his successes have also been funded in part with taxpayers’ money.
For example, SpaceX was subsidized by over $4.9 billion in government investments before going public in 2020, and Tesla received around $1.3 billion in government incentives between 2008 and 2018. While this public funding is not illegal, it raises the question of whether the public money could have been better spent elsewhere.
Market Manipulation and Securities Law
Manipulating the market is illegal according to both domestic and international securities laws, yet many consider Musk’s decisions to be too clever for the law.
When Musk issued his 2018 tweet regarding taking Tesla private, it sent investors racing to buy stock of Tesla as they bet on Musk’s confidence that the company was going to success. It is illegal to promote or create false information to spike stock prices, so Musk was ultimately investigated and questioned by the SEC after their investigation of the tweet.
In conclusion, it is remarkably impressive that Musk has made billions from his entrepreneurial and innovative endeavours. By carefully analyzing his successes and investment strategies, it is clear that Musk has learning to capitalize on any opportunity that he is presented with in order to generate wealth for himself and for the companies for which he is associated.
