How Tesla’s 2010 IPO Made SpaceX’s IPO Possible

Tesla had sold barely 1,000 cars when the company’s CEO, an up-and-coming entrepreneur named Elon Musk, rang the bell on the Nasdaq in June 2010.

The initial public offering valued Tesla at $1.7 billion, even though the company’s only product was its two-seater Roadster, which had an initial price of $100,000 and took seven hours to charge. Some prominent Wall Street figures were deeply skeptical.

“Tesla is selling, selling, selling,” CNBC anchor Jim Cramer told viewers. “You don’t want to own these stocks.”

Tesla and Mr. Musk have come a long way.

He is now asking investors to value SpaceX, where he is also CEO, at $1.77 trillion, more than a thousand times what Tesla was worth in 2010. SpaceX’s listing is expected to bring the company $75 billion. Tesla stock fetched $226 million, far less than it received in loans from the federal government.

Mr. Musk is much more famous than he was in 2010. As the world’s richest man, he has become a lightning rod for anti-billionaire sentiment. He owns the social network X, which he uses to broadcast right-wing political views.

But Tesla’s stock listing and the stunning rise in its share price in recent years have helped create an aura of mystique around Mr Musk. To his many admirers on Wall Street and Silicon Valley, he is a genius who made loyal investors insanely rich while disrupting the auto industry and spaceflight.

An investor who bought 1,000 Tesla shares at the initial public offering price of $17 in 2010 and held the stock until now would have made a profit of more than $5.8 million. The spectacular return gave SpaceX a “massive valuation,” said Michael Lenox, interim dean of the Darden School of Business at the University of Virginia.

“We believe in Elon,” Mr. Lenox said, summing up the view of Mr. Musk among his admirers. “He’s created these successful businesses. That’s what the market is looking at.”

Even in 2010, Mr. Musk demonstrated the audacity and talent to win over investors.

Echoing criticism from Mr. Cramer, Mr. Musk reminded viewers that the Wall Street guru also recommended buying Bear Stearns stock before the Wall Street bank collapsed during the financial crisis. Mr. Cramer, Musk said with a smirk during an interview with CNBC, was a “contra-indicator.”

“The smartest money in the world is betting on Tesla,” he told Bloomberg in another interview, without naming any investors. “There must be a reason.

Mr. Cramer was not entirely wrong. Tesla stock didn’t really take off until 2019, after the company’s Model 3 started selling in significant numbers.

Mr. Cramer later changed his mind about the fledgling automaker, which had become the largest maker of electric cars until it was overtaken by China’s BYD last year.

“Tesla was a highly speculative company when it went public, and I was skeptical,” he said in a statement to The New York Times this week. “As the company proved it could deliver and the facts changed, my perspective changed.”

In 2010, it was by no means certain that Tesla stock would be successful. Inside the company, employees were nervous, said Kurt Kelty, who was Tesla’s senior director of battery technology. “What happens to the stock price once it goes public?” he said they wondered. “Are we going to refuel on the first day? Are we going to take off like a rocket?”

Mateo Jaramillo, who was working on Tesla’s electronic propulsion systems at the time, said he and other workers were too busy to spend much time celebrating. “It took maybe an hour or two for us to confirm the event and then it started working straight away,” he said.

Tesla employees had stock options, but at the time they didn’t seem much more valuable than the bottles of “Roadster Red” wine they received as stock market mementos.

“We all believed in the company or we wouldn’t be there,” said Mr. Jaramillo, now chief executive of Form Energy, which makes large energy storage systems. “But none of us went in there expecting this to be a wealth-creating kind of effort.

It was an unfavorable time for the automotive industry. General Motors was emerging from bankruptcy and Ford Motor was selling Volvo at a loss after selling Jaguar Land Rover.

In fact, there was no market for electric vehicles. The Model S sedan, Tesla’s first mass-produced car, would not hit the roads for another 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 firms.

Mr Musk won over investors by portraying Tesla as a Silicon Valley start-up with huge growth potential, the opposite of the stodgy, century-old Detroit automakers.

“We operate in a fundamentally different way and structure than traditional car manufacturers,” Tesla’s 2010 prospectus said.

Mr. Musk keeps telling shareholders that Tesla is much more than just a car company. Now it says it will dominate the market for self-driving taxis and humanoid robots, untested technologies that don’t generate much revenue. Enough investors will buy that premise to give Tesla a market valuation of $1.4 trillion, many times the valuations of GM and Ford.

He also introduced SpaceX as 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, to understand the true nature of the universe and to spread the light of consciousness to the stars,” the company said in presentations to investors.

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 couldn’t have predicted its rise.

“Who knew how high the stock would go,” Mr. Kelty, now vice president of batteries at GM, said of Tesla shares. He added: “I wish I could hold my own.”