Is Musk Close to Over-Extending His Financial Abilities/Assets?

[TomH]

I wasn't sure if this was worth starting a new thread, but it seemed too OT to go in other existing threads. I started thinking about this in the Raptor thread, and then Coastal Ron made comments in the SLS forum that I really wanted to address.

Musk is doing just fine in case you haven't noticed.  He is worth more today than he ever has, and he is doing things with rockets that have never been done - and so far successfully.  If he perfects reusability there won't be much of a need for NASA to develop an exploration roadmap, because NASA will no longer be the sole way to leave LEO.  At that point NASA would be more useful if they returned to their NACA roots and helped our space industries with their own plans.

Sure, Musk is worth a lot. Some of that is coming from SpaceX, but a lot is coming from Tesla. Tesla's astounding ratings are sending its stock higher than his rockets go. Nevertheless, he is at a place of transition in both companies. In an attempt to build less expensive electric cars and increase market share by a couple of orders of magnitude, he is about to invest in a $5B Lithium-Ion battery factory with more capacity than all other factories combined. If anything causes Tesla stock to tank, Musk's own net value will follow.

With SpaceX, F9 and FH have healthy commercial profit potential. Now, however, he begins preliminary steps toward an UHLV that by my WAG is at minimum an order of magnitude more expensive than Falcon. I see no commercial customers at all who will want to purchase services from this program. (Sure some die hards will volunteer to spend out their lives on the red planet, but seriously, how many have the capital for it?) With Falcon, Musk has stayed with tried and true technology; now he must venture from what is safe into cutting edge research and the associated risks.

So far, Musk has demonstrated entrepreneurial genius with PayPal, Tesla, and SpaceX all. He is, however, on the tip of a fulcrum in attempting two great transitions. The first is Tesla into an electric car that dominates the world market for all cars. If he is successful, he can finance his own warp drive ship. If this battery investment goes south, followed by Tesla stock, he will be in trouble. If at the same time this BFR costs begin to spiral out of control, he will find himself in Captain Christopher Pike's seat telling Mr. Sulu Punch It, and the grand plan goes exactly nowhere.

So my questions are these. Is Musk getting close to over-leveraging himselfextending his capital assets? Is he taking too much risk in too many different fields all at one time? To what extent could problems in one industry domino or ripple into the other?

[Lars_J]

I guess I just don't see the point of this thread - how is the current situation any worse than it has been for SpaceX over the last decade? They seem to be doing better than ever. And Musk always appears to be over-extending himself.

[mdatb]

He is doing well, for now.

[RedLineTrain]

What do mean by "over-veraging?"  I haven't heard of SpaceX proposing to fund BFR with anything other than retained earnings.  Furthermore, it is safe to assume that big money won't be spent until the propulsion development risk is more or less retired.

[TomH]

What do mean by "over-leveraging?"  I haven't heard of SpaceX proposing to fund BFR with anything other than retained earnings.  Furthermore, it is safe to assume that big money won't be spent until the propulsion development risk is more or less retired.

Even if he is using earned funds, Tesla stock is in the ionosphere. If he spends his entire fortune on BFR, then anything begins suffering, he will have no reserves and wind up having to split stock, borrow, etc. Thus far he has pursued sound business strategy for the most part. ISTM that he is on the point of taking two immensely speculative steps simultaneously, steps far larger than he has before.

[TomH]

I guess I just don't see the point of this thread - how is the current situation any worse than it has been for SpaceX over the last decade? They seem to be doing better than ever. And Musk always appears to be over-extending himself.

As I said, I wasn't sure it deserved its own thread, yet every place I thought about putting it seemed too OT. In what other thread do you suggest I should have put it?

[R7]

Even if he is using earned funds, Tesla stock is in the ionosphere.

What would happen to hyper-inflated stock if CEO started to sell masses of it to fund completely unrelated dream? It'd need PICA-X to survive the plummet.

[Avron]

Even if he is using earned funds, Tesla stock is in the ionosphere.

What would happen to hyper-inflated stock if CEO started to sell masses of it to fund completely unrelated dream? It'd need PICA-X to survive the plummet.

He is on record saying he will be the last to sell

[docmordrid]

Tesla/Musk are not the only investors in the $5b battery factory. They have  partners in the form of Daimler & Toyota (both have a minority share in Tesla) and Panasonic at the least. Goldman Sachs Grou, Morgan Stanley, J.P. Morgan Chase, and Deutsche Bank are underwriting a $1.3b share.

[Coastal Ron]

I wasn't sure if this was worth starting a new thread, but it seemed too OT to go in other existing threads. I started thinking about this in the Raptor thread, and then Coastal Ron made comments in the SLS forum that I really wanted to address.

Wow.  I must say that I too thought my comments were verging off-topic, so I think you were right to move the conversation.  That said, I have no idea whether people care enough about the topic to sustain it.  I will provide a few comments though since you went to all this trouble...

Nevertheless, he is at a place of transition in both companies.

I'm sure you've heard the phrase "innovate or die", and Musk is just doing what many other companies must do to keep market momentum.  He is just better at getting noticed, since he tends to find "unique" ways to move his companies forward.

With SpaceX, F9 and FH have healthy commercial profit potential. Now, however, he begins preliminary steps toward an UHLV that by my WAG is at minimum an order of magnitude more expensive than Falcon. I see no commercial customers at all who will want to purchase services from this program.

Musk has stated that his goals for SpaceX do not mesh well with the expectations of stockholders of public companies, which is why he has resisted doing an IPO for SpaceX.  What he is good at though is managing his money, so while he is definitely working on the Raptor engine for a BFR, he has not yet shown that he is over-extending the financial abilities of SpaceX in order to pursue building the BFR.  We can revisit this when he starts building the actual rocket that the Raptor will go on, but for now I see no signs of putting SpaceX in danger of fiscal insolvency.

Regarding Tesla, battery production is what is limiting their growth, so building their own battery factory is quite smart - as long as their sustain their market growth.  But the batteries could have other uses too, like with Solar City (battery backups for home use - already announced), so the risk at this point is not unusual.

The first is Tesla into an electric car that dominates the world market for all cars.

I've never heard this claim, and I doubt he would make it.  He knows the limitations of battery technology today, and how slowly the market is changing over to battery-only cars.  His market is more like BMW than GM.

If at the same time this BFR costs begin to spiral out of control...

So far his hallmark has been good cost control, and understanding his product from a technical standpoint and a market standpoint.  Though there is always a chance he will bet big and fail, if you look closely he doesn't really make big bets, just strategic bets.  And those are easier to survive if they fail - which so far they haven't been.

So my questions are these. Is Musk getting close to over-leveraging himself? Is he taking too much risk in too many different fields all at one time? To what extent could problems in one industry domino or ripple into the other?

I don't think so.

[Kabloona]

It's definitely a relevant question. SpaceX is growing rapidly and will need to be a much larger company to pull off Falcon Heavy and get into the DoD payload business. For any other mere mortal, managing this alone would be more than a full-time job.

Add his job at Tesla, the solar power company, now the new battery factory, etc, I don't know how he does it.

I saw a recent TV show about con artists in which one con involved winning a food-eating contest by switching in twin brothers. Elon must have a secret identical twin...possibly two.

[Elmar Moelzer]

Batteries are and will be needed for many applications, not just electric cars. So a factory that builds them cheaper than the competition will always have customers. My only fear is that the factory produces enough yield to affect the prices, the Chinese will follow suit, bidding Musk out of business. The Chinese government did that with solar panels. They invested more than the US government into solar panels, allowing their factories to underbid the US government sponsored Solyundra, eventually underbidding them out of business. What works in Musks favor is that he would be his own biggest customer
I am less concerned about his efforts with SpaceX. I assume that the profits support the ongoing development of new rockets.

[Dave G]

I guess I just don't see the point of this thread - how is the current situation any worse than it has been for SpaceX over the last decade? They seem to be doing better than ever. And Musk always appears to be over-extending himself.

As I said, I wasn't sure it deserved its own thread, yet every place I thought about putting it seemed too OT. In what other thread do you suggest I should have put it?

I think it's a good topic.  Rockets are not just about engineering.  Without the capital, good ideas go nowhere.

[Oli]

Now, however, he begins preliminary steps toward an UHLV...

Its only preliminary steps.

Maybe he sees an opportunity for getting NASA to finance his rocket instead of SLS, in that case he must present something substantial soon. Unlikely to happen, but may be worth a try.

[butters]

The big idea ultimately triumphs over the big man.

Musk is attracting capital to 21st century manufacturing in the United States: batteries, electric motors, aluminum bodywork, widebody airframes, turbomachinery, impulse engines, etc. -- organized into vertical production lines, with extensive robotic automation, supported by on-site CAD/CAM engineers.

This is an idea that intuitively should work, and it appears to be working. And it is an idea that can and should work without the man -- especially since Musk is not a patent extremist. Anybody else who thinks this is a good idea and can build these kinds of manufacturing verticals so long as they can attract sufficient capital.

Right now, Musk is the hot hand and has investors chomping at the bit to fund his companies. If he falls from grace, this same moneyed set will move on to the next big thing in vertical manufacturing. They're sold on the idea.

[macpacheco]

I believe Tesla success alone guarantees SpaceX.
Having a company (Tesla) whose stock is close to four times the value of some analysts price targets alone speaks volumes about Elon's competence.
Plus Elon has turned away further offers to invest on SpaceX, because he absolutely wants to keep himself in full control of the company.
To be over leveraged, you need to be using leverage. To the best of my knowledge, neither Tesla, SpaceX or Solar City are leveraged in any significant level. All three companies have positive cash flow, and would be hugely profitable if they just reduced reinvestment of that cash flow by just a third.
I suggest before starting up such a thread, first do some financial research on Elon's investment and show that he's significantly leveraged at all.
Perhaps you need to understand of being leveraged means.
If Tesla stopped reinvesting on tooling to increase production, it would have a gross 30% margin including ZEV credits sold to other car manufacturers. There is no other car company with such picture perfect cash flow position out there.

[TomH]

Perhaps you need to understand of being leveraged means.

I do know what it means and I realize I am using the term very loosely. I will modify the question to ask whether he is putting himself into a situation where he could overextend his capital and thus have to leverage his non-liquid assets. Though I did not use leverage in its true technical sense, I did consciously use it because I believe Tesla stock value is part of his apparent Midas Touch aura. I think Tesla stock is overvalued and that a correction of this value could incur a domino damage effect throughout his entire corporate empire. Even if he is not over-leveraged through borrowing, he may place himself in a situation where a slowed cash flow in some areas may damage aggressive moves he is trying to make in other areas. I think my analogy of him being on the tip of a fulcrum applies. He appears poised to take multiple steps into territory that is larger and riskier than he has before.

I have changed the thread title vocabulary in a manner which I hope meets your lexical satisfaction.

[macpacheco]

Perhaps you need to understand of being leveraged means.

I do know what it means and I realize I am using the term very loosely. I will modify the question to ask whether he is putting himself into a situation where he could overextend his capital and thus have to leverage his non-liquid assets. Though I did not use leverage in its true technical sense, I did consciously use it because I believe Tesla stock value is part of his apparent Midas Touch aura. I think Tesla stock is overvalued and that a correction of this value could incur a domino damage effect throughout his entire corporate empire. I think my analogy of him being on the tip of a fulcrum applies. He appears poised to take multiple steps into territory that is larger and riskier than he has before.

Musk net worth was recently estimated at 11.7 billion. He can borrow three or four billion from those assets at very low interests, that would be a little bit of leveraging, very safe operation.
http://www.businessweek.com/articles/2014-02-26/as-tesla-shares-hit-250-ceo-elon-musk-makes-1-dot-1-billion

Tesla investment on the Giga Factory instead is being financed with a Tesla convertible bond offering, which is Tesla as a whole leveraging, not him putting more money into Tesla.
Are you aware of SpaceX borrowing money for its operations ?
I'm just trying to say, this subject makes no sense.
But speculate away.

[Coastal Ron]

Batteries are and will be needed for many applications, not just electric cars. So a factory that builds them cheaper than the competition will always have customers. My only fear is that the factory produces enough yield to affect the prices, the Chinese will follow suit, bidding Musk out of business.

China is no longer the place to go for inexpensive labor.  Shoes for the Chinese market are made in Vietnam, and it's actually cheaper to build products in Mexico now for the U.S. market.  Regardless, the Gigafactory will be highly automated, and those types of facilities are not affected by labor.

The Chinese government did that with solar panels. They invested more than the US government into solar panels, allowing their factories to underbid the US government sponsored Solyundra, eventually underbidding them out of business. What works in Musks favor is that he would be his own biggest customer

Let's keep in mind that China went bust in the solar panel business too, so no one won that price war... except for companies like SolarCity (Musk is Chairman), which didn't build their own panels.  Pretty smart, eh?

[su27k]

Tesla's factory plan is risky IMHO, but that's not related to SpaceX, SpaceX is not getting financial support from Tesla as far as we know.

BFR is only R&D for now, pretty harmless in term of cost. They already have a propulsion team in house, unless Musk wants to fire them they need something to do. The only extra cost is renting the test stand, which I assume is cheap.

If you're looking for signs of SpaceX over-extending, maybe you should look at launch pads, they already got 2 operational pads but 1 is idle (probably for the entire year), now they just rent a 3rd one and plan to build a 4th...

[llanitedave]

I guess I just don't see the point of this thread - how is the current situation any worse than it has been for SpaceX over the last decade? They seem to be doing better than ever. And Musk always appears to be over-extending himself.

I think he does this stuff mostly for fun, anyway.  He's fully aware of all the risks, yet he still takes them.  He doesn't seem particularly risk-averse. So who's to tell him how much risk is too much?

[RocketGoBoom]

With a net worth of over $11 billion right now, Elon Musk is not even remotely over-extended financially.

According to SEC filings from Tesla, he has a personal loan from Goldman Sachs for around $100 million. He took out that loan so he could buy stock when Tesla did an offering in May 2013. He also borrowed some money for a secondary offering for Solar City in late 2013.

We are talking about less than $200 million in debt with over $11 billion in assets. Most of his net worth has happened in the past 18 months with the dramatic growth in value for Solar City and Tesla. Neither of those companies has much debt. All of the Tesla debt is convertible debt at very low interest rates. There is a stock conversion element to the offerings that reduces risk.

The real value of SpaceX is likely not even included yet in his net worth. His recent two successful launches into GTO likely increased the value of his SpaceX stock dramatically. There is a private market where those shares trade. Prior to the recent two commercial launches, SpaceX was valued at $4 billion. I suspect with the recent successesful validating the commercial manifest, SpaceX is likely MUCH more valuable now. If Elon did a SpaceX IPO, it would likely have a market capitalization of over $10 billion. I think Elon owns approximately 2/3 of SpaceX stock right now.

Elon real net worth is likely closer to $13 billion or so. We will never know for sure without a SpaceX IPO.
He has maybe $200 million in debt with Goldman Sachs according to SEC filings.

That is like you having $1 million in stocks in your account and margin loan $20,000.
Would you feel over-extended?
Your brokerage would likely let you borrow $500,000 to $1 million if you had $1 million in stock in your account.

[RocketGoBoom]

He arguably has $10-15 billion.  His friends have even more (some of whom have publically mused about putting their capital at his disposal).   SpaceX has $5+ billion in sales on the books.  For them to suddenly disappear seems less and less likely through time IMO. 

Whether Solar City, Nest Labs, etc..   Well  let's just say betting against Elon generally historically isn't a winning strategy.  I think he's good for it, and I still plan to buy a 1-way ticket to Mars in 2050.

That is a good point in terms of his access to capital beyond his own net worth. Elon is good friends with some of the richest people on the planet. Larry Page and Sergey Brin of Google, The Paypal (sorry, need to stop here for a second and just say that I have to use stupid words to get my point across. I know that means I must have a weak argument, but that's why I use bad words). includes Peter Thiel, Reid Hoffman and a dozen other former Paypal guys that went on to found most of the top companies in the valley (Linkedin, Reddit, Yelp, etc.). Elon also has access to Founders Fund money or just about any VC on the planet.

If Elon wanted to start his own VC fund to finance his next few business ideas, does anyone doubt his ability to raise $2 billion within weeks? Peter Thiel, his far less famous friend from Paypal (sorry, need to stop here for a second and just say that I have to use stupid words to get my point across. I know that means I must have a weak argument, but that's why I use bad words).,  just raised $1 billion for their 5th fund at Founders Fund. They have a total of about $2 billion in VC money now.

With his history at Paypal, Tesla, Solar City, SpaceX, etc there are investors that will throw money at any wild ass crazy idea that Elon comes up with now. They will just accept that they don't understand what Elon is doing, but it will likely eventually disrupt a government or something else equally massive.

[Dave G]

In an attempt to build less expensive electric cars and increase market share by a couple of orders of magnitude, he [Musk] is about to invest in a $5B Lithium-Ion battery factory with more capacity than all other factories combined.

If we look past the headlines, the picture changes.

Of that $5 billion, the majority is coming from other companies (probably Panasonic and Apple). 

Specifically, they say:

http://www.teslamotors.com/sites/default/files/blog_attachments/gigafactory.pdf

Of that ≈$2 billion, nearly all will be raised by selling convertible bonds.

So it appears Musk himself is not investing any money in the Gigafactory.

Also, as another example of Musk's wordsmith ability, by the time the Gigafactory is fully operational, it will not have more capacity than all other factories combined, far from it.  This is fairly obvious from the graph in their PDF.  World Lithium Ion production is increasing rapidly.

[Dave G]

BFR is only R&D for now, pretty harmless in term of cost. They already have a propulsion team in house, unless Musk wants to fire them they need something to do. The only extra cost is renting the test stand, which I assume is cheap.

Exactly.

In fact, without anything significant to do, most engineers are not happy, and are more inclined to seek work elsewhere.  Use it or lose it.

[Norm38]

Raptor R&D is paid for by the billions in sales on the SpaceX manifest.  No Tesla funds needed. They can afford an engine development program. 

For the BFR itself, they're not going to cut metal until (and if) Falcon 9 lands on legs back at the launch site. Reinvesting the cost savings of reuse is what pays for the BFR.

[Avron]

Is musk over-extended, yes. Thats just Elon Musk, his always seems to be all in and then some.. If the day had 30 hours, we would be seeing an electric supersonic jet with VTOL capabilities.

[Jim]

I believe Tesla success alone guarantees SpaceX.

They are unrelated and that claim is unsupported.  It is just hype.

[macpacheco]

I believe Tesla success alone guarantees SpaceX.

They are unrelated and that claim is unsupported.  It is just hype.

Let's clear that up. Of course if SpaceX screws up huge, they are toast. But give Elon's track record that is an extremely remote chance.
But what I meant is should Elon need a few billion to put into SpaceX without loosing control of SpaceX we can come up with billions just from his Tesla stock (Tesla success). The other important factor is if he's got 50.1% of shares, if he comes up with 1 billion, the other share holders would have to pony up just about another billion or see their shares diluted (Elon would get even more control stake).

[Dave G]

I believe Tesla success alone guarantees SpaceX.

They are unrelated and that claim is unsupported.  It is just hype.

Yes and no.  Tesla's success does not guarantee SpaceX, but they are certainly related. 

Tesla has made Elon Musk very rich, and he is known for investing large portions of his personal wealth in SpaceX when things go wrong.  While financing alone doesn't guarantee success, it's certainly relevant. 

[RocketGoBoom]

I believe Tesla success alone guarantees SpaceX.

They are unrelated and that claim is unsupported.  It is just hype.

The claim does not need to be supported. It was his opinion. See quote, "I believe ...."

They are related. SpaceX is approximately 60% to 65% owned by a single person, Elon Musk. So his net worth from his other investments does play a related role in the overall health of SpaceX. The fact that Elon Musk has a $11 billion + net worth from his Tesla and Solar City investments does play a role in the "guarantee" that SpaceX will have sufficient resources to achieve Elon's goals.

If SpaceX were Elon's only company and he had nothing else (no Tesla, no Solar City) then SpaceX would be a much higher risk company.

Would anyone be taking Blue Origin seriously if Jeff Bezos didn't have $30 billion in Amazon stock?
So of course Tesla has an overall positive effect on Elon Musk's ability to execute with SpaceX.

[Avron]

I believe Tesla success alone guarantees SpaceX.

They are unrelated and that claim is unsupported.  It is just hype.

Yes and no.  Tesla's success does not guarantee SpaceX, but they are certainly related. 

Tesla has made Elon Musk very rich, and he is known for investing large portions of his personal wealth in SpaceX when things go wrong.  While financing alone doesn't guarantee success, it's certainly relevant. 

Elon has made Elon very rich - add in a bit from solar city while you are at it..  In business its not always what you know but who you know... Mr Musk has some very wealthy friends who have stepped up before and will do so again I am sure.

[Jim]

They are related. SpaceX is approximately 60% to 65% owned by a single person, Elon Musk. So his net worth from his other investments does play a related role in the overall health of SpaceX.

Not true.  The funds are not transferable. They are isolated from each other.

[RocketGoBoom]

They are related. SpaceX is approximately 60% to 65% owned by a single person, Elon Musk. So his net worth from his other investments does play a related role in the overall health of SpaceX.

Not true.  The funds are not transferable. They are isolated from each other.

Are you just trolling us now with these silly statements?

That statement displays a lack of understand on money, stocks and just about everything financial.
Stock can be sold. Stock can be used to secure loans for cash. Elon has done it before when he borrowed $100 million from Goldman Sachs to make other investments. He pledged some of his Tesla stock to do it in May 2013.

If he needed $500 million to fund anything at SpaceX, he could easily pledge 5% of his stock to secure the loan and raise $500 million within days. Do you understand how something like that works? It is not complicated.

[Avron]

They are related. SpaceX is approximately 60% to 65% owned by a single person, Elon Musk. So his net worth from his other investments does play a related role in the overall health of SpaceX.

Not true.  The funds are not transferable. They are isolated from each other.

Are you just trolling us now with these silly statements?

That statement displays a lack of understand on money, stocks and just about everything financial.
Stock can be sold. Stock can be used to secure loans for cash. Elon has done it before when he borrowed $100 million from Goldman Sachs to make other investments. He pledged some of his Tesla stock to do it in May 2013.

If he needed $500 million to fund anything at SpaceX, he could easily pledge 5% of his stock to secure the loan and raise $500 million within days. Do you understand how something like that works? It is not complicated.

[runs for cover... ]

[Coastal Ron]

...If he needed $500 million to fund anything at SpaceX, he could easily pledge 5% of his stock to secure the loan and raise $500 million within days...

And we would likely never know if additional capital was injected into SpaceX, since SpaceX is not a public company.

Oooh, the mystery...   

[ncb1397]

Perhaps you need to understand of being leveraged means.

I think my analogy of him being on the tip of a fulcrum applies. He appears poised to take multiple steps into territory that is larger and riskier than he has before.

I have changed the thread title vocabulary in a manner which I hope meets your lexical satisfaction.

Elon has been in much riskier territory in the past than he is in now. He almost went bankrupt starting a car company and a space launch company at the same time with about 1/10 the cash you would want to start either of those. He was paying Tesla payroll out of his personnal account which was almost gone until he got a secured loan from the U.S. government and he has said that SpaceX couldn't survive another Falcon 1 test launch failure. Compared to that, he is far from over-extending himself. They can build their BFR 1 piece at a time very slowly with spare cash and spare time. All they need is a  15 meter x 150 meter x 15 meter hanger to store it indefinately. If the company was only doing a BFR and all personnel were tasked on it full time with no related revenue stream, it would be risky. They have to maintain their propulsion/rocket team for potential Falcon 9 troubleshooting/engineering fixes and to keep their trade secrets somewhat contained anyways and so it makes sense for them to work on something if nothing is going wrong with their launches. They will have significant spare engineering resources in the coming years as commercial crew, F9H and F9R development winds down. They will also have significant spare manufacturing capability if re-usability ramps up.

[Jim]

Stock can be sold.

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

[QuantumG]

Stock can be sold.

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

Depends on the quantity, the proportion to other stocks and whether or not anyone believes his announced reasons for selling the stock. Hypothetically, "I need to raise money for my rocket company" would be a very believable reason.

[RocketGoBoom]

Stock can be sold.

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

Insiders and founders sell their company stock quite regularly. It often has no impact at all on the stock price.
If he sold a large chunk of his stock holdings in Tesla all at once, that would likely elicit news articles. But his stock in Tesla is currently worth over $7 billion. If he needs $150 million for something else, I doubt anyone would be surprised. That represents just 2% of his Tesla holdings. A simple statement saying, "I need $150 million for this new project...." and just about everyone would get it.

I doubt he would actually sell stock. He can easily raise money without selling his own personal stock. With the position he is in, he can basically give himself new stock options or restricted stockgrants every year, thus maintaining his overall percentage of ownership in the company. So even with outside new capital, quite often the CEO doesn't get diluted. It's good to be the king.

[go4mars]

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

There are many scenarios where it wouldn't.  For example if he says "I sold X billion $ worth to reputable purchasers like Toyota, Buffet, Founders Fund, etc. for the express use of proceeds reasons Y&Z."   Or "I sold the entire company to GM, except for the future projects division (new battery tech, submarine design, Mars car design, and other certain shared/retained intellectual property rights for which I paid fair market value)".   

Many company founders cash out more than him despite strong expectations.  Expensive yacht habits and so forth.     Others would rather build a vibrant Mars colony to retire to. 

[Dave G]

Stock can be sold.

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

He wouldn't have to sell it.  He can take a loan out against his stock.  Unless he defaults on the loan, his shares wouldn't be sold.

Please read the rest of the post from RocketGoBoom:

Stock can be used to secure loans for cash. Elon has done it before when he borrowed $100 million from Goldman Sachs to make other investments. He pledged some of his Tesla stock to do it in May 2013.

If he needed $500 million to fund anything at SpaceX, he could easily pledge 5% of his stock to secure the loan and raise $500 million within days. Do you understand how something like that works? It is not complicated.

[llanitedave]

Stock can be sold.

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

Your implication, Jim, is that his money isn't his to spend as he wishes.  That would be true with money that's assigned to a corporation or another use.  But we're talking about his money, that which he can turn into liquid assets at will.  He acquired it, it belongs to him.  He can spend it or invest it where he likes.

[aero]

Stock can be sold.

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

Your implication, Jim, is that his money isn't his to spend as he wishes.  That would be true with money that's assigned to a corporation or another use.  But we're talking about his money, that which he can turn into liquid assets at will.  He acquired it, it belongs to him.  He can spend it or invest it where he likes.

But as an insider Elon can not quietly sell his stock or any significant part of it. And mob rules say that if Elon sells he knows something so the mob sells, too, and there goes the value.

[docmordrid]

Stock can be sold.

And if he sells any of his stock, it would have repercussions that would affect the rest of the stock

Your implication, Jim, is that his money isn't his to spend as he wishes.  That would be true with money that's assigned to a corporation or another use.  But we're talking about his money, that which he can turn into liquid assets at will.  He acquired it, it belongs to him.  He can spend it or invest it where he likes.

But as an insider Elon can not quietly sell his stock or any significant part of it. And mob rules say that if Elon sells he knows something so the mob sells, too, and there goes the value.

Only when there is no stated reason for selling it, or when a stated reason makes no sense. Those cause uncertainty. Selling 2-4% to improve a product or process, or to create new ones, doesn't.

[Dave G]

But as an insider Elon can not quietly sell his stock or any significant part of it. And mob rules say that if Elon sells he knows something so the mob sells, too, and there goes the value.

Only when there is no stated reason for selling it, or when a stated reason makes no sense. Those cause uncertainty. Selling 2-4% to improve a product or process, or to create new ones, doesn't.

Again, he wouldn't have to sell it.  He can borrow against it.

As an analogy, if you have a lot of equity in your home, you can borrow against it to start your own business.  You may not be able borrow the entire amount of home equity, as the house may decrease in price, but you can borrow some portion of it.

Similarly, Elon can put up some number of Tesla shares as equity for a loan.  For the duration of the loan, no one can sell those shares.  If the shares he puts up as equity have a value of X, then he may be able to borrow .3X, or something like that, as stocks are more volatile than home prices.

The bottom line is that Musk's wealth from Tesla can be used to finance SpaceX without any impact on Tesla stock price.  This gives SpaceX a greater chance of success.  It doesn't guarantee success, but it improves the odds.

[Robotbeat]

Concern trolling. Very weird question, made sense earlier but not now.

[sugmullun]

Concern trolling. Very weird question, made sense earlier but not now.

  To those who love what SpaceX is attempting it seems a valid thing to have some interest in, but as there's no way to intelligently discuss the "issue" (without inside info to Musk's finances or mind), I don't see the discussion producing anything useful.

[R7]

Would it not send mixed signals to borrow money for SpaceX project against non-SpaceX stock and/or is non-public stock more difficult to use as collateral.

[ArbitraryConstant]

Similarly, Elon can put up some number of Tesla shares as equity for a loan.  For the duration of the loan, no one can sell those shares.  If the shares he puts up as equity have a value of X, then he may be able to borrow .3X, or something like that, as stocks are more volatile than home prices.

Yeah. The real danger was when both companies weren't shipping anything. They had a limited air supply, they required cash injections in the form of big stock events, loans, or cash injections from Musk to make payroll. That's extremely precarious. Tesla is out of that phase, SpaceX is there or nearly so.

Funding a capital project like the battery gigafactory while not trivial is not precarious in the same way.

Raptor development is probably even easier as I don't think it's that capital intensive yet. They didn't have to build a rocket company from scratch to start work on Raptor. It will become capital intensive when they start work on the near-to-launch-site rocket factory, but that'll be when the engine is largely complete, and potentially after a SpaceX IPO which will provide a lot of liquidity.

I don't know about SpaceX, but I'd say Tesla is probably overvalued, SpaceX will likely get some of the same treatment just because of Musk's aura. But being able to issue overvalued shares and turn them into real capital investment is a huge advantage for building the next thing.

Overall the risk to both companies seems at rather a low ebb.

[RocketGoBoom]

Would it not send mixed signals to borrow money for SpaceX project against non-SpaceX stock and/or is non-public stock more difficult to use as collateral.

This is all hypothetical. SpaceX has not done anything to hint that they even need an infusion of capital. With SpaceX now actually launching on their commercial manifest, they are likely more cash flow positive than ever. So for us to speculate about Elon Musk borrowing money for SpaceX (using Tesla stock as collateral) is sort of a waste of time.

If hypothetically SpaceX did need to do a fundraising round (Series D round or whatever) they would have every VC, hedge fund and angel investor filling up Elon's voicemail within 5 minutes of hearing about it.

This guy is not exactly struggling for investors to hop on the bandwagon.
They are drooling to get in on Elon's coattails.

[Elmar Moelzer]

It will become capital intensive when they start work on the near-to-launch-site rocket factory, but that'll be when the engine is largely complete, and potentially after a SpaceX IPO which will provide a lot of liquidity.

I don't think there will be a SpaceX IPO before MCT is complete.

[ArbitraryConstant]

I don't think there will be a SpaceX IPO before MCT is complete.

If that's true it's because they don't need one, they can get the liquidity without it. Even better.

[R7]

If hypothetically SpaceX did need to do a fundraising round (Series D round or whatever) they would have every VC, hedge fund and angel investor filling up Elon's voicemail within 5 minutes of hearing about it.

No doubt. How many of them are sold on Mars colonization is another story.

[yg1968]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement. 

[guckyfan]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement.

Gwynne Shotwell stated recently they don't have a business case for Mars but they do it anyway.

[RocketGoBoom]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement.

Gwynne Shotwell stated recently they don't have a business case for Mars but they do it anyway.

There wasn't really a business case for Elon attempting to buy an ICBM from Russia to put a greenhouse on Mars as the "money shot". But he tried to do it regardless.

[yg1968]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement.

Gwynne Shotwell stated recently they don't have a business case for Mars but they do it anyway.

There wasn't really a business case for Elon attempting to buy an ICBM from Russia to put a greenhouse on Mars as the "money shot". But he tried to do it regardless.

He gave up on that idea and decided to fund SpaceX instead. One time stunts aren't very useful.

[yg1968]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement.

Gwynne Shotwell stated recently they don't have a business case for Mars but they do it anyway.

I don't think that was her exact quote. In any event, striving for something over the long term and actually putting billions into it are two different things.

[macpacheco]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement.

Gwynne Shotwell stated recently they don't have a business case for Mars but they do it anyway.

They aren't quite doing Mars (in significant $$$) yet. Raptor makes sense even without Mars, if it delivers a fully reusable rocket with the same GTO, LEO and TMI payloads of expendable FH. Using a simple S1 with 6ish Raptors and S2 with a single raptor. FH performance for GTO and beyond incurs high losses due to lower Kerolox ISP.
If such a rocket would provide better performance than anything operational for commercial launches while delivering full reusability, that might be game over for the competition.
The entry level BFR can be both seen as SpaceX plan for Mars as well as the SLS, ULA and Ariane killer. The initial goal shouldn't be to deliver the actual Mars colonial transport, but instead a solution to put an entire ISS worth of stuff on the Mars surface as a research outpost to show the world it can be done. Then I think NASA and others money would follow in significant numbers.
In the end it's entirely possible SpaceX will superseed SLS and be a profitable enterprise for SpaceX even without the Mars colony (making the Mars colony a profitable enterprise if they can get NASA to pay halfway between the currently bloated SLS budget and the actual BFR costs, they could fund building dozens of BFRs with that extra money).
Time will tell. Of course, this is 100% wild conjecturing.

[mme]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement.

I find this thread silly too, because SpaceX is doing really well, Elon Musk has a track record of pulling rabbits out of hats, and he has more money than God in stock which means he can borrow money to get through any rough patch.

That said, Elon Musk has consistantly stated that the entire purpose of SpaceX is to help bring about the colonization of Mars. He has also stated SpaceX won't IPO until MCT is a reality because shareholders could interfere with the plan. In the headquarters of SpaceX is a huge image of Mars as it is now, next to an image what it might look like in the distant future when it's terraformed. Tom Mueller has stated that everything SpaceX does is with the goal of getting to Mars.  Gwynne Shotwell has stated that there is no business case for Mars, but that SpaceX will pursue Mars. The point of BFR is to get colonists to Mars, hopefully paying their own way.

And yet people constantly say things like, "Elon/SpaceX won't do BFR/MCT/etc unless NASA/someone-else funds it." All the evidence is that Elon is all in, why do people doubt that?

[macpacheco]

And yet people constantly say things like, "Elon/SpaceX won't do BFR/MCT/etc unless NASA/someone-else funds it." All the evidence is that Elon is all in, why do people doubt that?

I think the all in analogy is wrong. He hasn't actually bet everything on this. Far from that. This doesn't mean he's waiting for NASA to fund him significantly either. SpaceX might not need much funding for MCT for another 3 or 4 years. In the meantime, SpaceX is launching, is making a profit on CRS / GEO / DoD missions.
I believe the first Raptor based rocket will be a FH replacement that is fully reusable.
Do you think the Raptor engine will be uncompetitive vs FH for launches ? Right now I believe Raptor development is inspired by the MCT demands, but it's an engine valuable even for current FH type launches.
Musk takes rabbits out of his hat because he's extremely efficient at extracting maximum value of his signature achievements, like the Merlin engine, the extremely effective Tesla factory, next in line should be the Raptor engine and then the Tesla giga battery factory.

[yg1968]

I find the idea of this thread a bit silly. Regardless of his finances, Musk will not invest in any project unless he believes that it can make money. He is not going to Mars unless he has NASA as a client. Having one engineer work on a BFR doesn't mean that SpaceX will be funding this project on its own. His plans for a Mars BFR is business development. If SLS gets cancelled, SpaceX wants to be ready for an opportunity to bid for its replacement.

I find this thread silly too, because SpaceX is doing really well, Elon Musk has a track record of pulling rabbits out of hats, and he has more money than God in stock which means he can borrow money to get through any rough patch.

That said, Elon Musk has consistantly stated that the entire purpose of SpaceX is to help bring about the colonization of Mars. He has also stated SpaceX won't IPO until MCT is a reality because shareholders could interfere with the plan. In the headquarters of SpaceX is a huge image of Mars as it is now, next to an image what it might look like in the distant future when it's terraformed. Tom Mueller has stated that everything SpaceX does is with the goal of getting to Mars.  Gwynne Shotwell has stated that there is no business case for Mars, but that SpaceX will pursue Mars. The point of BFR is to get colonists to Mars, hopefully paying their own way.

And yet people constantly say things like, "Elon/SpaceX won't do BFR/MCT/etc unless NASA/someone-else funds it." All the evidence is that Elon is all in, why do people doubt that?

I am a fan of SpaceX (and what they have accomplished) but it's not realistic to expect them to spend billion of dollars to fund private missions to Mars. Musk is always thankful to NASA for their contracts. SpaceX's funding for Mars missions has been minimal so far. Musk isn't going to stay a billionnaire if he doesn't have clients that pay him to go to Mars. It's wishful thinking to believe that SpaceX can get to Mars without any government funding.  Musk is a businessman and he understands that.

[Jim]

Musk takes rabbits out of his hat because he's extremely efficient at extracting maximum value of his signature achievements, like the Merlin engine,

that is not his achievement.

[RocketGoBoom]

Musk takes rabbits out of his hat because he's extremely efficient at extracting maximum value of his signature achievements, like the Merlin engine,

that is not his achievement.

Elon Musk paid for it and his job title says, "Chief Designer".
Sounds like it is his to me.
I think Elon is the first person around to also give due credit to his team of smart guys.

[Robotbeat]

The engine is Tom's, IMHO. Musk is more of a big picture guy, he probably made the decision for a tic-tac-toe pattern on v1.0, possibly the more efficient octoweb. I don't think he's super into the miniscule details of solving all the problems of a new rocket engine design.

[Nessus]

I am a fan of SpaceX (and what they have accomplished) but it's not realistic to expect them to spend billion of dollars to fund private missions to Mars. Musk is always thankful to NASA for their contracts. SpaceX's funding for Mars missions has been minimal so far. Musk isn't going to stay a billionnaire if he doesn't have clients that pay him to go to Mars. It's wishful thinking to believe that SpaceX can get to Mars without any government funding.  Musk is a businessman and he understands that.

Who say's Musk's aim in life is to stay rich.. on Earth? As far as I can tell, when he says that he wants to 'die on mars', I'm sure he's willing to spend every penny of his wealth realising that wish. Profits from SpaceX go towards SpaceX's research and development... and Mars colonization. On Mars, material wealth on Earth is only useful if it produces money to buy stuff to send to Mars. Can't visit your Earth mansion too often!

[meekGee]

The engine is Tom's, IMHO. Musk is more of a big picture guy, he probably made the decision for a tic-tac-toe pattern on v1.0, possibly the more efficient octoweb. I don't think he's super into the miniscule details of solving all the problems of a new rocket engine design.

Sure, but the engine is not one of the unique differentiators of SpaceX.  It has some attributes that are first-in-class, some that aren't, it sure fits the job it has to do, and I venture to say that it's not by some happy accident.

Musk's achievements, at least IMO, are the things that make SpaceX different - the no-compromise goal, the vertical integration, the decision to pursue full and rapid reuse, and the very market-aware behavior.

Someone brought up Tesla upthread, and it is very similar - the no-compromise goal, the vertical integration, the strategic market-centric behavior (start with high-end luxury cars, work your way down - exactly opposite what everyone else is doing)

And since Musk is the driving force behind both companies, you can't treat them as separate companies with for-hire "professional" CEOs that just happen to be the same person.  They are linked, and have each other's back. I don't know if the investors overlap, btw, but I'm sure both sets of investors see the companies as extensions of Musk, for better or for worse.

[AJW]

I worked 15 years for a self-made billionaire and I have to say that they think very differently than most of us.  At a certain point they have all the cars, jets, and vacation homes  that they want and they know that all of their family's needs will be met far into the future.  They ask themselves what is left and the answer becomes 'Legacy'.  Collecting Norman Rockwells and Maxfield Parrish is fun, but soon thoughts turn to building museums so others can see their collection.  Bill Gates turns to Philanthropy.  Musk has decided that his legacy will be to create the first colony on another planet.  Kennedy got us to the Moon.  Musk wants to take us to Mars, hopefully to stay.

I really don't think he is concerned about any business justification.

If you think that this thread is silly, the 'When will SpaceX IPO' was even sillier.  The answer was easy.  Musk has no incentive to go public until after his legacy is insured.

[Jim]

Musk takes rabbits out of his hat because he's extremely efficient at extracting maximum value of his signature achievements, like the Merlin engine,

that is not his achievement.

Elon Musk paid for it and his job title says, "Chief Designer".

No, it is Chief Technology Officer.  Big difference.  He sets the course (like choice of propellants) but the others like Mueller (pintle injector) got him there.

[Oli]

I really don't think he is concerned about any business justification.

I don't think (or hope) Musk is one of those mentally challenged billionaires who waste money on their pointless legacy.

Someone brought up Tesla upthread, and it is very similar - the no-compromise goal, the vertical integration, the strategic market-centric behavior (start with high-end luxury cars, work your way down - exactly opposite what everyone else is doing)

It's not the opposite of what everyone else is doing. There are numerous smaller car companies that build luxury cars for a niche audience. The big players introduce their innovations in the luxury segment first. Tesla is not particularily vertically integrated at all.

[sublimemarsupial]

Musk takes rabbits out of his hat because he's extremely efficient at extracting maximum value of his signature achievements, like the Merlin engine,

that is not his achievement.

Elon Musk paid for it and his job title says, "Chief Designer".

No, it is Chief Technology Officer.  Big difference.  He sets the course (like choice of propellants) but the others like Mueller (pintle injector) got him there.

The SpaceX website (where he is listed as "Chief Designer") and pretty much every interview with SpaceX employees disagrees with you. Elon is intimately involved with the design process, he does not just sit in his cubicle making the broad choices while letting other do the legwork.

[yg1968]

I am a fan of SpaceX (and what they have accomplished) but it's not realistic to expect them to spend billion of dollars to fund private missions to Mars. Musk is always thankful to NASA for their contracts. SpaceX's funding for Mars missions has been minimal so far. Musk isn't going to stay a billionnaire if he doesn't have clients that pay him to go to Mars. It's wishful thinking to believe that SpaceX can get to Mars without any government funding.  Musk is a businessman and he understands that.

Who say's Musk's aim in life is to stay rich.. on Earth? As far as I can tell, when he says that he wants to 'die on mars', I'm sure he's willing to spend every penny of his wealth realising that wish. Profits from SpaceX go towards SpaceX's research and development... and Mars colonization. On Mars, material wealth on Earth is only useful if it produces money to buy stuff to send to Mars. Can't visit your Earth mansion too often!

Welcome to the Forum!

Musk has mentioned that there is something to be said for a keeping a business within the same family. He has mentionned the Ford family as an example that he would like to follow. He wants to pass on his companies to his sons. He doesn't intend to take the Buffet pledge and give most of his money to charity.

[meekGee]

The NUMMI plant does everything from metal stamping to interior plastics. If you follow up, he even plans to manufacture the batteries. That's pretty vertical.  Most other high volume attempts at EV or hybrid (Leaf, volt, Prius) were nothing like Roadster or the S.

A few years ago I spoke with him a few times. He is most definitely involved in detailed tech design.

[RedLineTrain]

Musk has mentioned that there is something to be said for a keeping a business within the same family. He has mentionned the Ford family as an example that he would like to follow. He wants to pass on his companies to his sons. He doesn't intend to take the Buffet pledge and give most of his money to charity.

Too late.  Musk has already signed the Buffett Pledge...

http://givingpledge.org/

As for Musk, he knows his rocket down to the gnat's ass (in his words).  Jim shouldn't make the mistake of thinking that he's not intimately involved.

[Lurker Steve]

The NUMMI plant does everything from metal stamping to interior plastics. If you follow up, he even plans to manufacture the batteries. That's pretty vertical.  Most other high volume attempts at EV or hybrid (Leaf, volt, Prius) were nothing like Roadster or the S.

A few years ago I spoke with him a few times. He is most definitely involved in detailed tech design.

You can't compare Telsa with GM or Toyota methods.

Telsa only builds a single car model. They discontinued the Roadster to work on the Model S.

GM and Toyota have much broader product lines and numerous factories and suppliers. It makes sense to them to share the same tooling for Gas / Hybrid / Electric autos, and just make adjustments for the powertrain. There aren't that differences between a fully plug-in electric Prius and the Gas / Electric Hybrid version of the Prius.

They don't manufacture all their components, but they definitely have design input into each detail.

Also, you can't really talk about high-volume auto manufacture until you reach the same output as the Honda factory that is cranking out Civics and Accords.

[Redcoat22]

Not true.  The funds are not transferable. They are isolated from each other.

Unsubstantiated. 

Distributions can be used however an equity owner desires; particularly in a privately held company.

[Dudely]

Elon Musk paid for it and his job title says, "Chief Designer".

No, it is Chief Technology Officer.  Big difference.  He sets the course (like choice of propellants) but the others like Mueller (pintle injector) got him there.

Jim,
You are just wrong so often it is getting silly. Elon's titles are CEO and "Chief Designer". Anyone with the common sense to check their website would know that.

http://www.spacex.com/about/leadership

Fair mistake- if you look at Wikipedia it says CEO and CTO, so perhaps it changed?

[Lar]

Let's all be excellent to each other, please. Thread trimmed a bit.

[R7]

CTO, Chief Designer, same difference. It's his company so he can call himself Technica Pontifex Maximus if it pleases him. Historical anecdote is of course Sergei Korolev, Chief Designer was his cover name. But Jim has a fair point, Mueller & co aren't interns there, they make chief designer's dreams come true while filling in the nitty-gritty technical details, keeping things within bounds of reality.

[meekGee]

The NUMMI plant does everything from metal stamping to interior plastics. If you follow up, he even plans to manufacture the batteries. That's pretty vertical.  Most other high volume attempts at EV or hybrid (Leaf, volt, Prius) were nothing like Roadster or the S.

A few years ago I spoke with him a few times. He is most definitely involved in detailed tech design.

You can't compare Telsa with GM or Toyota methods.

Telsa only builds a single car model. They discontinued the Roadster to work on the Model S.

GM and Toyota have much broader product lines and numerous factories and suppliers. It makes sense to them to share the same tooling for Gas / Hybrid / Electric autos, and just make adjustments for the powertrain. There aren't that differences between a fully plug-in electric Prius and the Gas / Electric Hybrid version of the Prius.

They don't manufacture all their components, but they definitely have design input into each detail.

Also, you can't really talk about high-volume auto manufacture until you reach the same output as the Honda factory that is cranking out Civics and Accords.

Well, I think they're working on the X model without planning to discontinue S, and then on the E model, again, without plans to discontinue either X or S.

Roadster was the first thing they did, and to the point - was not vertically integrated.  That's why it's gone.

I say high-volume, since that's where they're headed with these models, in terms of manufacturing setup.  Roadster was a boutique car, in comparison.

When talking about vertical integration, the absolute key thing to notice is the battery plant. 

It's the opposite of outsourcing.  It's the philosophy that says that if something is important to the company, it should be manufactured in-house, and you should retain the knowledge, and if possible - you should be the best in the world at it.

Anyway - to stay on topic - the reason this is important is that when you bring things in-house, you can leverage them towards other goals. This is important for Musk, since he does span multiple industries.

His next goal is Mars, right?  How much Mars-specific equipment will he need?  He will want the industrial base to design and manufacture such.  A car company and a rocket company is a good place to start.

[woods170]

Musk has mentioned that there is something to be said for a keeping a business within the same family. He has mentionned the Ford family as an example that he would like to follow. He wants to pass on his companies to his sons. He doesn't intend to take the Buffet pledge and give most of his money to charity.

Too late.  Musk has already signed the Buffett Pledge...

http://givingpledge.org/

As for Musk, he knows his rocket down to the gnat's ass (in his words).  Jim shouldn't make the mistake of thinking that he's not intimately involved.

Jim will undoubtly spank you (and me) for that remark, but fact is that Jim does not work for SpaceX so he has no intimate insight into what level (and detail) Elon Musk is involved in his companies rockets and spaceships. On the other hand, you and me do not have that insight either.

[yg1968]

Not true.  The funds are not transferable. They are isolated from each other.

Unsubstantiated. 

Distributions can be used however an equity owner desires; particularly in a privately held company.

If Tesla pays dividends on its common shares, it would have to pay dividends to all of its shareholders which seems unlikely.

[yg1968]

Musk has mentioned that there is something to be said for a keeping a business within the same family. He has mentionned the Ford family as an example that he would like to follow. He wants to pass on his companies to his sons. He doesn't intend to take the Buffet pledge and give most of his money to charity.

Too late.  Musk has already signed the Buffett Pledge...

http://givingpledge.org/

He must have changed his mind. He refused to sign on to the pledge initially for the reasons that I mentionned. This might force SpaceX to eventually become public. In which case, you can forget about a Mars mission being privately funded by SpaceX.

[RocketGoBoom]

Elon Musk paid for it and his job title says, "Chief Designer".

No, it is Chief Technology Officer.  Big difference.  He sets the course (like choice of propellants) but the others like Mueller (pintle injector) got him there.

Jim,
You are just wrong so often it is getting silly. Elon's titles are CEO and "Chief Designer". Anyone with the common sense to check their website would know that.

http://www.spacex.com/about/leadership

Fair mistake- if you look at Wikipedia it says CEO and CTO, so perhaps it changed?

The point is, Jim doesn't check before going on attack. He seems to like to take one sentence (or even just a few words), quote only that, then ignore the bulk of the rest of what was written in a larger paragraph. Then he makes some silly contrary statement limited to perhaps, "unsubstantiated" or "hype". Is this viewed as enlightened discussion here? I am new to this website, but Jim just seems to be trolling. Were all 20,000 of his posts like that?

[starsilk]

Elon Musk paid for it and his job title says, "Chief Designer".

No, it is Chief Technology Officer.  Big difference.  He sets the course (like choice of propellants) but the others like Mueller (pintle injector) got him there.

Jim,
You are just wrong so often it is getting silly. Elon's titles are CEO and "Chief Designer". Anyone with the common sense to check their website would know that.

http://www.spacex.com/about/leadership

Fair mistake- if you look at Wikipedia it says CEO and CTO, so perhaps it changed?

The point is, Jim doesn't check before going on attack. He seems to like to take one sentence (or even just a few words), quote only that, then ignore the bulk of the rest of what was written in a larger paragraph. Then he makes some silly contrary statement limited to perhaps, "unsubstantiated" or "hype". Is this viewed as enlightened discussion here? I am new to this website, but Jim just seems to be trolling. Were all 20,000 of his posts like that?

Jim knows a *lot* about rockets. a *lot*. however his posting style is sometimes a bit.. er.. brusque, shall we say.

best to be very, very sure you are correct before arguing with him.

[RocketGoBoom]

best to be very, very sure you are correct before arguing with him.

I was.

http://www.spacex.com/about/leadership

[RocketGoBoom]

Not true.  The funds are not transferable. They are isolated from each other.

Unsubstantiated. 

Distributions can be used however an equity owner desires; particularly in a privately held company.

If Tesla pays dividends on its common shares, it would have to pay dividends to all of its shareholders which seems unlikely.

I have wondered where Elon gets cash to fund the billionaire lifestyle. His listed salary from Tesla is small, something like $39,000. He doesn't draw a paycheck from Solar City.

http://finance.yahoo.com/q/pr?s=tsla&ql=1

http://finance.yahoo.com/q/pr?s=SCTY+Profile

He also doesn't have any history of selling shares in either company. So who pays for the jet, the mansion, etc? All loans from Goldman Sachs against his stock?

[starsilk]

best to be very, very sure you are correct before arguing with him.

I was.

http://www.spacex.com/about/leadership

treasure your 'win'. people who post here save a small, satisfied place in their hearts for the rare occasions they successfully argued a point with Jim. it doesn't happen often... and listen to what he says - he's usually right. you'll learn a lot.

[RocketGoBoom]

best to be very, very sure you are correct before arguing with him.

I was.

http://www.spacex.com/about/leadership

treasure your 'win'. people who post here save a small, satisfied place in their hearts for the rare occasions they successfully argued a point with Jim. it doesn't happen often... and listen to what he says - he's usually right. you'll learn a lot.

Does he work for ULA? He seems to have some axe to grind or latent hostility to all things SpaceX.

[Lars_J]

treasure your 'win'. people who post here save a small, satisfied place in their hearts for the rare occasions they successfully argued a point with Jim. it doesn't happen often... and listen to what he says - he's usually right. you'll learn a lot.

What is this, the starsilk "Jim worship hour"?

He has a lot of expertise in a certain area, but that doesn't have to translate over to other areas. (i.e finance, as this thread illustrates) While he may forget the range of his knowledge, we don't have to. Appeal to authority is a poor substitute for facts.

[starsilk]

treasure your 'win'. people who post here save a small, satisfied place in their hearts for the rare occasions they successfully argued a point with Jim. it doesn't happen often... and listen to what he says - he's usually right. you'll learn a lot.

What is this, the starsilk "Jim worship hour"?

hardly. I've had my share of arguments with him, and even won a couple. but he's usually fair, and rarely wrong.

we're well off topic here.

[Jim]

best to be very, very sure you are correct before arguing with him.

I was.

http://www.spacex.com/about/leadership

Only because you're late to the party.
His original title was CTO and CEO.

https://web.archive.org/web/20090203054220/http://spacex.com/company.php#spacex_people

[R7]

[neoforce]

Musk has mentioned that there is something to be said for a keeping a business within the same family. He has mentionned the Ford family as an example that he would like to follow. He wants to pass on his companies to his sons. He doesn't intend to take the Buffet pledge and give most of his money to charity.

Too late.  Musk has already signed the Buffett Pledge...

http://givingpledge.org/

He must have changed his mind. He refused to sign on to the pledge initially for the reasons that I mentionned. This might force SpaceX to eventually become public. In which case, you can forget about a Mars mission being privately funded by SpaceX.

How can signing the giving pledge have any impact on if/when spacex becomes public?  From the FAQ at giving pledge:

ONCE SOMEONE PLEDGES, HOW WILL YOU MAKE SURE THEY FOLLOW THROUGH?
The pledge is a moral commitment to give, not a legal contract.

I see no way that this pledge will "force SpaceX eventually become public" 

[Chris Bergin]

Thread has turned into some thing stupid. Locked.