- Elon Musk has said he's ridding himself of earthly possessions.
- But he mostly owns California real estate — millions of dollars worth, an illiquid asset that's hard to sell.
- His Tesla shares, after a massive run-up, are worth close to $40 billion, but he almost never sells stock. He lives off loans from major banks, using his
Tesla stake as collateral. - Musk appears to be selling several of his multimillion-dollar homes, but his latest moves aren't really all that weird; he's never cared much about money, seeing it instead as a means to an end.
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Tesla and SpaceX CEO
That's because he's a multibillionaire, to a degree. As Tim Higgins pointed out in The Wall Street Journal, Musk's 20% stake in Tesla makes him worth about $40 billion — but he can't sell any of those shares without relinquishing some control over the company or provoking a sell-off that could damage investors.
So Musk lives off credit: around $550 million is his current burden, owed to a trio of banks, and backed by his Tesla shares.
With Tesla's market capitalization at nearly $150 billion — it's worth more than General Motors, Ford, and Fiat Chrysler Automobiles combined — this isn't an issue, and Musk recently qualified for the first tranche of a big equity payday that the Tesla board approved several years ago. It adds up to a billion in stock, but don't expect Musk to turn it into cash. He has rarely been a seller; more often, he borrows more money to buy additional shares.
There's been some speculation that Musk, who has been essentially broke in the past, is unloading some of his homes in Los Angeles and San Francisco to raise money. He says that isn't the case, and that what he really wants to do is lighten his burdens, possibly because he and his companion, the musician Claire Elise Boucher, better known by her stage name, Grimes, just had a child together.
Even if Musk is trying to deleverage his personal balance sheet a bit, he's not exactly marketing liquid assets; multimillion-dollar mansions in California can take years to sell, if they sell at all.
A walking, talking wealth paradox
What Musk embodies is actually a walking, talking wealth paradox: so rich on paper, but kinda not rich in reality. He does have access to a type of "supermoney," to borrow a term from the economist George Goodman, who wrote a book with that title in 1972. It isn't legacy stock wealth nor dividend income — which today is taxed at lower rates than regular income — but rather debt that uses his Tesla stake as collateral.
It sort of like having a mega-credit-card, or a gigantic home-equity line of credit.
Before you get mad, it's worth noting that Musk only has this option because he took the approximately $180 million he made when eBay bought PayPal — cofounded by Musk — in 2002 and sunk all his winnings into Tesla and SpaceX, at the time considered to be monumentally risky investments.
Musk's view was that he had a chance to move the needle on global warming with Tesla — electric vehicles emit no greenhouse gases — and also pursue a "back-up the biosphere" plan for Earth by using SpaceX as a way to colonize Mars, making humanity "multiplanetary," in his words.
Skeptical? Fine. But space exploration had previously required the resources of large nations, while the received wisdom in the auto industry, pre-Tesla, was that starting a new car company was impossible. Musk couldn't have picked two better ways to lose all his money.
Which he essentially did with Tesla in 2008; only some eleventh-hour financing, a US Department of Energy loan guarantee, and equity stakes from Daimler and Toyota enabled the company to avoid bankruptcy and build its first all-original vehicle, the Model S sedan. And it wasn't ka-ching after that: Tesla raised just $220 million from its 2010 IPO, and the stock price was flat for several years after that.
Limited enthusiasm for rich-people stuff
Musk has shown some affection for rich-people things in the past, including a McLaren supercar (which he wrecked), the James Bond Lotus submarine car, and his aforementioned mansions. But for the past decade, I've tried to figure out what he spends money on, and apart from supporting his large family (six children, including X Æ A-12, his son with Grimes), I've come to the conclusion that he doesn't blow his money on ... anything.
He has some cool clothes, but that's hardly an extravagant outlay. He drives Tesla vehicles. He sent his personal original Roadster into orbit, so goodbye to that museum piece! He tweets a lot, so he probably owns the latest iPhone. I think he plays video games, so ... an Xbox and a flat-screen or two? And he travels quite a bit, using a business jet, but so do mere millionaires.
Perplexing as this thought might seem, Musk thinks of money less as a medium of exchange and even less as a store of value; he doesn't even see money as a way to make more money, a standard play of high-net-worth individuals.
No, he sees money as a means to an end, and he appreciates its function as a financing tool. To achieve both his grand and futuristic goals and to serve the more mundane but immediately impactful effect of creating 40,000 jobs at Tesla and thousands more at SpaceX.
It would appear that he's now doubled down on his money philosophy and is determined to shed any obvious trappings of billionaire-ness. And that isn't at all surprising.
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