Tesla had sold just 1,000 cars when the company’s CEO, an up-and-coming entrepreneur named Elon Musk, rang the Nasdaq opening bell in June 2010.
The IPO valued Tesla at $1.7 billion, even though the company’s only product was its two-seater Roadster, which had a starting price of $100,000 and took seven hours to charge. Some Wall Street figures were deeply skeptical.
“Tesla is selling, selling, selling,” CNBC host Jim Cramer told viewers. “You don’t want to own this stock.”
Tesla and Mr. Musk have come a long way.
He is now asking investors to value SpaceX, of which he is also CEO, at $1.77 trillion, more than a thousand times Tesla’s value in 2010. The listing of SpaceX is expected to bring in $75 billion for the company. Tesla’s listing raised $226 million, far less than it received in federal government loans.
Mr. Musk is far more well-known than he was in 2010. As the world’s richest person, he has become a lightning rod for anti-billionaire sentiment. He owns the social media site X, which he uses to disseminate right-wing political views.
But Tesla’s stock market listing and the dizzying rise in its stock price in recent years have helped create an aura of mystery around Mr. Musk. To his many admirers on Wall Street and Silicon Valley, he is a genius who made loyal investors incredibly rich while disrupting the auto industry and space flight.
An investor who purchased 1,000 shares of Tesla stock in 2010 at an initial price of $17 and held the shares until now would have made a profit of more than $5.8 million. This spectacular return has enabled a “massive valuation” of SpaceX, said Michael Lenox, interim dean of the Darden School of Business at the University of Virginia.
“’We trust Elon,’” Mr. Lenox said, summing up Mr. Musk’s view among his admirers. “He created these successful businesses. That’s what the market is looking at.”
Even in 2010, Mr. Musk showed boldness and skill in attracting investors.
Warding off Mr. Cramer’s criticism, Mr. Musk reminded viewers that the Wall Street guru also recommended buying shares of Bear Stearns before the Wall Street bank collapsed during the financial crisis. Mr. Cramer, Mr. Musk said with a smirk in an interview with CNBC, was a “counter-indicator.”
“The smartest money in the world is to bet on Tesla,” he told Bloomberg in another interview, without naming any investors. “They must have a reason.”
Mr. Cramer was not completely wrong. Tesla shares were stagnant for nearly a decade, trading below the offering price until 2019. They began to take off after the company’s Model 3 began selling in significant numbers.
Mr. Cramer later changed his mind about the fledgling automaker, which became the largest maker of electric vehicles until China’s BYD overtook it last year.
“Tesla was a highly speculative company when it went public, and I was skeptical,” he said this week in a statement to the New York Times. “As the company has proven it can act and the facts have changed, my view has changed.”
In 2010, it was uncertain whether Tesla stock would be successful. Inside the company, employees were anxious, said Kurt Kelty, Tesla’s senior director of battery technology. “What will happen to the stock price once it goes public?” » he said they had wondered. “Are we going to tank on the first day? Are we going to take off like a rocket?”
Mateo Jaramillo, who worked on Tesla’s electronic propulsion systems at the time, said he and other workers were too busy to spend much time celebrating. “Maybe we took an hour or two to acknowledge the event and then immediately went back to work,” he said.
Tesla employees had stock options, but at the time, these didn’t seem much more valuable than the bottles of “Roadster Red” wine they received as souvenirs of their IPO.
“We all believed in the company, or we wouldn’t have gone there,” said Mr. Jaramillo, now chief executive of Form Energy, a company that makes large energy storage systems. “But none of us went into it with the expectation that it would be some sort of wealth-creating business.”
It was an inauspicious time for the auto industry. General Motors was emerging from bankruptcy and Ford Motor was selling Volvo at a loss after selling Jaguar Land Rover.
There was effectively no market for electric vehicles. The Model S sedan, Tesla’s first production car, won’t hit the road for two years.
“There were still a lot of questions about electric cars and whether they were viable,” said Mr. Lenox, whose research at the University of Virginia focuses on technology companies.
Mr. Musk won over investors by describing Tesla as a Silicon Valley start-up with enormous growth potential, in contrast to Detroit’s century-old, hard-working automakers.
“We operate in a fundamentally different manner and structure than traditional automobile manufacturers,” Tesla’s 2010 prospectus states.
Mr. Musk continues to tell shareholders that Tesla is much more than a car company. He now says it will dominate the market for self-driving taxis and humanoid robots, untested technologies that don’t generate much revenue. Enough investors buy into this hypothesis to give Tesla a market valuation of $1.4 trillion, several times the valuations of GM and Ford.
He also presented SpaceX as much more than just a rocket company or satellite internet service provider. It will also build data centers in orbit to power xAI, its artificial intelligence unit, and lead humanity to Mars, he said.
SpaceX’s mission is to “build the systems and technologies necessary to make life multiplanetary, understand the true nature of the universe, and extend the light of consciousness to the stars,” the company said in investor presentations.
No one can say for sure how SpaceX stock will perform and whether it will follow the trajectory of Tesla stock. Even executives who spent years at the automaker admitted they didn’t anticipate its rise.
“Who would have known how much the stock had gone up,” Mr. Kelty, now vice president for batteries at GM, said of Tesla shares. He added: “I wish I had kept mine.”
