Tesla had barely sold 1,000 cars when the company’s chief executive, a budding entrepreneur named Elon Musk, rang the opening bell at Nasdaq in June 2010.
The initial public offering valued Tesla at $1.7 billion, even though the company’s only product was its two-seat Roadster, which had a starting price of $100,000 and took seven hours to charge. Some prominent Wall Street figures were deeply skeptical.
“Sell, sell, sell Tesla,” CNBC host Jim Cramer told viewers. “You don’t want to own this stock.”
Tesla and Mr. Musk have come a long way.
Now he is asking investors to value SpaceX, where he is also chief executive, at $1.77 trillion, or more than a thousand times Tesla’s value in 2010. The SpaceX listing is expected to raise $75 billion for the company. Tesla’s listing raised $226 million, which is significantly less than the federal government’s borrowings.
Mr Musk is better 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 the Tesla stock listing and the astonishing rise in its share price in recent years helped create an aura of mystery around Mr Musk. To his many fans on Wall Street and Silicon Valley, he is a genius who made loyal investors extremely wealthy while disrupting the auto industry and space flight.
An investor who bought 1,000 Tesla shares in 2010 at the initial offering price of $17 and held the shares until now would have made a profit of more than $5.8 million. That stellar return has enabled SpaceX’s “massive valuation,” said Michael Lennox, interim dean of the Darden School of Business at the University of Virginia.
Mr. Lennox summed up Mr. Musk’s outlook among his fans, saying, “‘We have confidence in Elon.'” “He’s built these successful businesses. That’s what the market is tracking.”
Even in 2010, Mr Musk displayed courage and talent to win over investors.
Brushing aside Mr Cramer’s criticism, Mr Musk reminded the audience that the Wall Street guru also recommended buying shares in Bear Stearns before the Wall Street bank collapsed during the financial crisis. Mr. Cramer, Mr. Musk said with a smile during an interview with CNBC, was a “resister.”
“The smartest money in the world is betting on Tesla,” he told Bloomberg in another interview, without naming any investors. “They must have a reason.”
Mr. Cramer was not entirely wrong. Tesla shares languished for nearly a decade and were trading well below the offering price in 2019. These prices started rising after the company started selling Model 3 in large numbers.
Mr. Cramer later changed his mind about the fledgling carmaker, which became the largest maker of electric vehicles until it was overtaken by China’s BYD last year.
“When Tesla went public it was a highly speculative company and I was skeptical,” he said in a statement to The New York Times this week. “As the company proved it could execute and the facts changed, my perspective changed.”
In 2010, it was by no means certain that Tesla stock would be successful. Curt Kelty, Tesla’s senior director of battery technology, said employees inside the company were concerned. “What will happen to the stock price once it goes public?” He said he was surprised. “Are we going to build tanks on day one? Are we going to fly like rockets?”
Mateo Jaramillo, who worked on Tesla’s electronic propulsion system at the time, said he and other employees were too busy to celebrate. “Maybe it took us an hour or two to accept what happened and then we got back to work,” he said.
Tesla employees had stock options, but at the time, they seemed no more valuable than the bottles of “Roadster Red” wine they received as souvenirs of the stock market listing.
“We all had confidence in the company, otherwise we wouldn’t be there,” said Mr. Jaramillo, now chief executive of Farm Energy, a company that builds large energy-storage systems. “But none of us went in there expecting it to be a wealth-creating endeavor.”
This 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 mass-production car, won’t hit the road for another two years.
“There were still a lot of questions about electric cars and whether they were viable,” said Mr. Lennox, whose research at the University of Virginia focuses on technology companies.
Mr Musk won over investors by portraying Tesla as a Silicon Valley start-up with huge growth potential, a stark contrast to the century-old Detroit carmakers.
Tesla’s 2010 prospectus stated, “We operate in a fundamentally different way and structure than traditional automobile manufacturers.”
Mr Musk is still telling shareholders that Tesla is more than a car company. They now argue that it will dominate the market for self-driving taxis and humanoid robots, untested technologies that are not generating much revenue. Enough investors bought that complex to give Tesla a stock market valuation of $1.4 trillion, which is several times higher than the valuations of GM and Ford.
He is presenting SpaceX as more than just a rocket company or satellite internet service provider. He has said it will also build an orbiting data center to power its artificial intelligence unit xAI and take humanity to Mars.
SpaceX’s mission is “to create the systems and technologies needed to make life multiplanetary, understand the true nature of the universe, and extend the light of consciousness to the stars,” the company has said in investor presentations.
No one can say with certainty how SpaceX stock will perform and whether it will follow the trajectory of Tesla shares. Even executives who spent years at the automaker acknowledged they had failed to anticipate its rise.
“Who would have known how high the stock would have gone,” Mr. Kelty, now a vice president in charge of batteries at GM, said of Tesla shares. He added, “I wish I had stuck to myself.”
