How Elon Musk built his galaxy

Following the shock announcement of his $ 44 billion takeover bid on the social network Twitter, accepted by the company, Elon Musk began discussions with investors to fund the operation. And to attract them, the businessman would give them a possible return to the stock market within three years of delisting, according to the “Wall Street Journal” on Wednesday. If he succeeds and ends the deal, he will have added a new star to his galaxy.

Because Elon Musk is not Jeff Bezos, Mark Zuckerberg or Bill Gates. His fortune, he built it as his career progressed, not on a concept or a single business, but on a series of ideas, intuitions, bets, constantly reinventing himself. This South African, who has been passionate about computers since childhood, first moved to Canada at the age of 17 to escape military service in the apartheid regime in South Africa. He then continued his studies in the United States and entered Stanford for … two days. There, in the mid-1990s, he dropped everything to create his first company with his brother Kimbal.

Zip2, his first company

Zip2 is a kind of folder that integrates cards. They resell it for $ 307 million to Compaq in 1999. Elon Musk has $ 22 million in his pockets. This is his first jackpot. For a million dollars, he buys a sports car … which he stamps almost immediately. “It’s not very much in line with my usual behavior,” he confided in a documentary dedicated to him.

More sensible: he spends the rest of his earnings setting up another company, an online bank, which he calls X.com (a domain name that he will later buy back and which he still has today). It was there that he crossed paths with Peter Thiel, who set up a payment company, Confinity. The two companies merge and form PayPal before Musk was ousted as CEO. However, he retained a stake in the company, and when PayPal was sold to eBay for $ 1.5 billion in 2002, this time Musk pocketed $ 180 million. It’s launched. And see more and more.

SpaceX, Tesla … difficult beginning

In 2002, he created SpaceX with the ambition of colonizing Mars. So, the year after, he spends $ 6 million on starting Tesla. The beginning is difficult. SpaceX misses several launches, Tesla’s batteries accumulate problems, to the point that the company almost goes bankrupt in 2008 … Musk is not far from losing all his fortune.

Happiness, however, turns around in the form of SpaceX’s $ 1.6 billion deal with NASA and the success of Tesla’s Model S. Musk’s companies are shaking up the codes in their respective fields. And their valuation is skyrocketing. Not far from the $ 1,000 billion today for Tesla, of which he still controls 17% (and more if he decided to exercise certain options), about $ 100 billion according to estimates for SpaceX, of which he owns 48%. His personal fortune thus exceeds $ 250 billion.

No synergies

Stratospheric, and yet Musk did not stop there. He has built a veritable galaxy of companies exploring areas as diverse as transportation (The Boring Company, valued at nearly $ 1 billion), neuroscience (Neuralink, more than $ 500 million), renewable energy (SolarCity, sold to Tesla for 2 , 6 dollars) billion), artificial intelligence (Open AI) …

A priori, there are only a few bridges between these different activities. Although some technologies can be shared, for example between Neuralink and Open AI. And when Musk tried to play synergies, as when Tesla took over SolarCity, it caught the attention of the authorities, who questioned the selling price and terms. A judge finally acknowledged that this acquisition was justified. And there are, of course, indirect economic relationships, as evidenced by the influence of the takeover of Twitter on the price of Tesla, mainly due to Musk’s sale of Tesla shares to finance operations.

The idea of ​​a business

What will be Twitter’s place in this new set? Some fear possible conflicts of interest and wonder how a scandal involving Tesla or SpaceX would be handled on the platform. Another consequence of the acquisition: the idea of ​​a holding company that brings together all of Musk’s activities is back on the table. The billionaire had already put forward a hypothesis two years ago. He has already set up three structures, X Holdings I, II and III, to facilitate operations: The first would be Twitter’s parent company, which would merge with the second, with the third would help with the financing.

This assembly relaunched the idea of ​​a larger holding company, “X” (Musk’s favorite letter that even used it to name its children), as the Alphabet for Google. Musk would get operational and tax benefits from it, he could also communicate about his vision of the world. But the idea does not necessarily convince. “It’s fine if it’s for Elon Musk to combine his efforts to fund a personal offer on Twitter. It’s a terrible idea if Tesla unites SpaceX and Boring Co under one umbrella. Investors hate conglomerates and it would reduce earnings per share and price-to-earnings ratio, “said investor Gary Black. But Musk is not one to be held back by the advice of others.

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