Tesla shares are set to add to Friday’s strong gains, with premarket deals pointing to an extra 6.4% rise on Monday after the 10% advanced marked at the end of last week.
Priced at US$1,544 the stock is up some 260% in the 2020-to-date, and, gives the electric auto-maker a market capitalisation of close to US$290bn.
At Friday’s close Musk’s own stake in Tesla had grown by over US$6bn.
It reportedly tees up the rocketman for his latest bumper payday with US$1.8bn potentially due resulting from his incentivisation deal at Tesla.
In May, Musk landed US$700mln after the first market valuation thresholds were met.
Subsequent levels of the twelve tranches that make up his package (worth US$55bn in aggregate) are set to be triggered as the market cap rises and is sustained in intervals of US$50bn.
The options-based remuneration will, however, see the vested equity bunkered for five years before they can be cashed out.
It comes as the electric auto-maker has been achieving ‘solid’ delivery volumes and increasing confidence on Wall Street that Musk’s revolutionary ambitions can be realised (even in the face of global pandemic).
Musk, perhaps the closest thing to a real-world Tony Stark or Lex Luther, is simultaneously revolutionising multiple industries - motor vehicles, renewable energy, battery power – whilst reinvigorating America’s space business, boring giant holes beneath Los Angeles and working on technologies to directly integrate humans with computers.
It is fair to say his approach is at different dimension to the traditional, passive investment of Warren Buffett. The so-called ‘Oracle of Omaha’ is known for his personal frugality and his famous investment ethos can mostly be boiled down to ‘find a good asset that’s undervalued by everyone else, buy a part of it, then hold and wait’.
That’s not to denigrate the model which is decidedly long-termist and defensive amidst market volatility and short-term economic strife.
Both men are followed by the business-minded public with intense attention and almost god-like idolisation, though the difference between the two are quite apparently stark and material.
One is more traditional and conservative, while the other is a futurist with an eccentric persona
Indeed, it would be unthinkable that Berkshire Hathaway’s stock price will on any given day fall 10% as Warren impulsively smokes cannabis on a live internet podcast.
Although the generation gap is already something of a void, the valuation gap has closed and now evidently Musk ‘riches’ exceed those of Buffett – according to the Bloomberg Billionaires Index, at least.
What Musk owns
Elon Musk is very much a capitalist of the twenty-first century albeit his initial successes were premillennial, in the original dot-com surge of the nineties.
His breakthrough success came in the late 1990s with the US$307mln sale of Zip2 – an internet city guide cofounded by Musk in 1995 - which saw the tech entrepreneur net US$22mln for a 7% holding.
Around half of that cash was invested in his next successful venture, X.com which later became Paypal before the 2002 US$1.5bn takeover by eBay. Musk banked around US$165mln for the company sale, for his 11.7% stake.
Subsequent ventures have seen Musk establish SpaceX, a commercial rocket and spaceship manufacturer which in June provided the hardware to send NASA astronauts to the international space station in America’s first manned domestic launch for nearly a decade. SpaceX is a key component of Musk professed masterplan to take humanity to Mars.
Musk bought into Tesla Motors in 2004, in a Series A funding round, and would later become more actively involved in the company before seizing control as chief executive and ‘product architect’ by 2008.
Meanwhile, the SolarCity renewable energy company was cofounded by Musk’s cousins in 2006, prior to its 2016 acquisition by Tesla. Operating as a wholly-owned subsidiary, the idea is for the company to create large centralised solar power generation to offset the extra electricity demands created by EVs.
Hyperloop, launched as a company in 2013, aims to create high-speed subterranean transportation systems and it is connected to Musk’s The Boring Company which is digging the tunnels, beneath urban centres such as Los Angeles.
Musk’s OpenAI and Neuralink, set up in 2015 and 2016 respectively, focus on artificial intelligence and the integration of technology and human beings.
Buffett boomer capitalism
Buffett famously bought up some US$1.3bn shares in Coca-Cola in the late eighties, a time when the drinks company was struggling and underperforming, and that investment much more recently was estimated to be worth the equivalent of around US$18bn, which is an eye-watering gain of about 1,300%.
The stake in Coke, about 9.5% of the company, generates something like US$650mln a year for Buffett’s Berkshire Hathaway.
Buffett’s other notable buys have included some of the world’s biggest financial institutions – Well Fargo, stakes bought in 1989 and as of 2019 valued at about US$20bn, and Bank of America where in 2008, mid-financial crisis, he acquired a 9.3% holding recently worth US$26.7bn.
Naturally, the investment record is not flawless. After buying at what turned out to be top of the market for ConocoPhillips back in 2008, Buffett ended up losing around US$4.4bn of a staked US$7bn investment.
In 2013, Berkshire acquired US$2bn of debt in Energy Future Holdings which would file for bankruptcy, with an US$873mln loss marked on the investment.
Other ‘fails’ attributed to Buffett include losses on a 1993 investment in Dexter Shoe Co, in which he lost US$9bn after it collapsed, along with a premature exit of UK supermarket chain Tesco, and missed early opportunities to buy into Google.
The 89-year-old’s investments have not all focussed on twentieth-century capitalism. He has also amassed holdings in a notable technology plays – buying into Apple since 2016, with Berkshire now holding around 5% of the iPhone maker’s stock and last year it began picking up stock in Jeff Bezos’s Amazon.
(If anyone rivals Musk in the comic book persona stakes its certainly the Amazon owner and aspirational space travel rival Bezos – he leads the Billionaire’s index with a total net worth of US$189bn, ahead of Microsoft’s Bill Gates and Facebook’s Mark Zuckerberg).