Tesla Motors is one of the most extraordinary business success stories in recent decades, in part because it has accomplished what no other American company has accomplished in more than half a century:
Become a viable new car company.
One of the main reasons the company has succeeded is because of the vision, determination, and, well, balls, of the man at the helm, entrepreneur Elon Musk.
Many successful companies arrive at success only after going through near-death experiences, and Tesla went through one in 2008.
In 2008, with the global economy melting down, Tesla was behind in delivering its first car, and the company was having trouble raising the additional capital it needed to stay afloat.
Musk was personally in OK shape, thanks to earlier successes with PayPal and other companies, but he couldn’t stand the thought that his latest project was going to go bust. So he took his “last $35 million” of cash, as he later described it, and doubled down on Tesla.
Five years later, Musk’s stake in the now-profitable Tesla is worth about $2.5 billion.
And Musk is still swinging for the fences.
Tesla has decided to use its skyrocketing stock price to go on the offensive. The company will sell stock to repay the money it borrowed from the government. And one of the big buyers of that stock will be Elon Musk.
Musk will plow another $100 million into Tesla stock.
Even he apparently does not have this money just sitting around, so he’s going to borrow it from Goldman Sachs.
This new loan, of $150 million, will be added to Musk’s existing tab at Goldman of $125 million. So, after the deal, Musk will owe Goldman $275 million.
The loans will be secured by Musk’s other assets, which include his stake in Tesla and stakes in companies like SpaceX.
Relative to Musk’s $2.5 billion of stock in Tesla, a $275 million loan is chump change.
But if Tesla were to stumble and go bankrupt, as car companies occasionally do?
Well, then, depending on the health of Musk’s other ventures, that $275 million might look like a big number.
Many entrepreneurs are celebrated for their “risk-taking,” but aside from quitting safe jobs to start companies, many entrepreneurs actually don’t take that much personal financial risk. Elon Musk does. And his willingness to take that risk, especially back in 2008, is a big reason Tesla is succeeding today.
Here’s the description of Musk’s loans from Goldman, as noted by CNBC’s Herb Greenberg:
Goldman Sachs Bank USA, an affiliate of Goldman, Sachs & Co., has made extensions of credit in the aggregate amount of $125 million to Elon Musk and the Elon Musk Revocable Trust dated July 22, 2003, or the Trust, a portion of the proceeds of which Mr. Musk used to purchase our common stock. Goldman Sachs Bank USA has agreed to make additional extensions of credit in an aggregate amount of $150 million to Elon Musk and the Trust, which together with the currently outstanding $125 million would total $275 million. Mr. Musk will pay the purchase price for up to 540,605 shares of common stock he has indicated a preliminary interest in purchasing in this offering and the 660,740 shares of our common stock being purchased in a subsequent private placement with a portion of the proceeds of these additional extensions of credit to be made by Goldman Sachs Bank USA. Interest on these loans accrue at market rates. Goldman Sachs Bank USA received and will receive customary fees and expense reimbursements in connection with these loans. As a regulated entity, Goldman Sachs Bank USA makes decisions regarding making and managing its loans independent of Goldman, Sachs & Co.
We are not party to these loans, which are full recourse against Mr. Musk and the Trust and other shares of capital stock of unrelated entities owned by Mr. Musk and the Trust. The terms of these loans were negotiated directly between Mr. Musk and Goldman Sachs Bank USA.
SEE ALSO: The Tesla Story
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