elon-musk-companies

Elon Musk Companies: Inside The Musk’s Empire

Elon Musk is one of the richest people in the world, with his main ownership in Tesla, making him worth more than a hundred billion dollars. The companies founded by Elon Musk range from electric vehicles and renewable energies, with Tesla, rockets, with SpaceX, infrastructure with The Boring Company, and neurotechnology with Neuralink. And in April 2022, Musk acquired Twitter for about $44 billion.

Musk’s Origin Story

After a circuitous route from his home country of South Africa to the United States, Musk secured two internships in Silicon Valley in 1994. One was with an energy-storage start-up, while the other was a game developer company.

The following year, he got accepted into a Stanford University doctorate program but dropped out soon after. He instead chose to capitalize on the booming popularity of the internet and launched his own start-ups including Zip2 and X.com – a precursor to PayPal.

Musk has since gone on to found companies in the exploration, artificial intelligence, aerospace, green energy, and transportation industries. Let’s take a look at some of them below.

SpaceX

SpaceX is a space exploration company with a core focus on reusable rockets, space tourism, and satellites that can provide better internet connectivity. Musk created SpaceX out of a need to reduce transportation costs in space and ultimately, facilitate the colonization of Mars.

SpaceX has notoriously lofty ambitions and is never far from the headlines, but the company is making significant progress on its projects. The company recently won a $2.9 billion NASA contract to develop a system for landing astronauts on the moon.

Tesla

tesla-business-model
Tesla is vertically integrated. Therefore, the company runs and operates Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.

Tesla is perhaps the company for which Elon Musk is best known. Through the popularization of electric vehicles, Musk is seeking to make green vehicles more affordable to consumers.

After rolling out the prototype Tesla Roadster in 2005, the company now offers an SUV, sedan, and sports car variant. Tesla’s pick-up truck, dubbed the Cybertruck, is due for production commencement in late 2021.

Tesla has also expanded into non-automatic products, acquiring solar power business SolarCity in 2016. To complement solar systems, Tesla also sells batteries to store generated energy.

tesla-competitors
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with the self-driving software.

OpenAI

OpenAI is an artificial intelligence research lab with a stated goal of creating artificial intelligence that benefits humanity.

Musk has openly stated that he created the company because of the fear of a so-called “intelligence explosion” – or a hypothetical point where artificial intelligence growth becomes unmanageable and poses a threat to humanity.

In 2019, OpenAI transitioned from a non-profit to a for-profit organization. Soon after, it partnered with Microsoft after securing $1 billion in investment funding.

The Boring Company

Musk founded The Boring Company on a whim after being stuck in Los Angeles traffic and lamenting the limitations of two-dimensional transport.

As a result, the company aims to construct underground tunnels that allow easier access from A to B. This includes traffic and freight movement, but it also encompasses better access for pedestrians and utility networks.

The Boring Company was infamous for randomly selling 20,000 flamethrowers to consumers. Critics suggest that the move was a non-dilutive capital raising or publicity stunt, or perhaps both.

Neuralink

Neuralink is a relative newcomer to Elon Musk’s suite of companies. Founded in 2016, the company employs neuroscientists to develop implantable brain-machine interfaces (BMIs).

This important work is intended to give those suffering from paralysis more independence – whether that be through increased mobility, communication, or self-expression.

In 2020 the company released a proof of concept in the form of a pig called Gertrude which had a small computer chip embedded in its brain. However, Musk accepts that it will be some time before the product is safe to use in people.

Twitter

how-does-twitter-make-money
Twitter is a platform business model, monetizing the attention of its users in two ways: advertising and data licensing. In 2018, advertising represented 86% of its revenue at over $2.6 billion. And data licensing represented over $424 million primarily related to enterprise clients using data for their analyses.

In April 2022, Elon Musk finalized the acquisition of Twitter, in one of the most controversial deals of business history.

Let’s review the timeline.

Musk placed, out of the blue, a bet to take over the whole company. It was April 14th, 2022:

elon-musk-twitter-offer

The public records show the whole conversation of the offer Musk made to take over Twitter. Below is the main extract, of the conversation, between Musk and the Twitter’s board, as per SEC Filings, Musk had sent a message to Bret Taylor, Chairman of the Twitter’s board:

I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.  

However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.

As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.

Twitter has extraordinary potential.  I will unlock it.

Elon Musk

In a follow-up text, Musk highlighted:

As I indicated this weekend, I believe that the company should be private to go through the changes that need to be made.

After the past several days of thinking this over, I have decided I want to acquire the company and take it private.

I am going to send you an offer letter tonight, it will be public in the morning.

Are you available to chat?

Elon Musk

As a final message to the Twitter’s board, Musk highlighted:

1. Best and final

a. I’m not playing the back-and-forth game.

b. I have moved straight to the end.

c. It’s a high price and your shareholders will love it.

d. If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder.

i. This is not a threat, it’s simply not a good investment without the changes that need to be made.

ii. And those changes won’t happen without taking the company private.

2. My advisors and my team are available after you get the letter to answer any questions

a. There will be more detail in our public filings. After you receive the letter and review the public filings, your team can call my family office with any questions.

Elon Musk

In short, Musk had offered to purchase Twitter, for $54.20 per share, a 54% premium, before Musk had started to buy Twitter shares.

While the offer was good from a valuation standpoint, the board tried to fight it. Also influential business commentators were against it.

As Cramer highlighted:

This is one of those where they are literally not doing their job, there’s no fiduciary responsibility if they just say, ‘you know what, we take it, there are times when individual directors are opened up for a level of lack of fiduciary that I think crosses the line. This crosses the line.

Similar comments came from Galloway:

Throughout the deal, none expected it to go through so quickly. Indeed, given the controversy around Twitter, most business people thought this would have turned into a few months’ fight over Twitter’s ownership.

Yet, things tumbled very quickly. And by April 25th, 2022, the deal was officially announced!

twitter-acquisition-deal-announcement
The announcement of Twitter’s board, accepting the offer from Elon Musk to buy the company.

As explained in the official press release:

Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing of the proposed transaction. The purchase price represents a 38% premium to Twitter’s closing stock price on April 1, 2022, which was the last trading day before Mr. Musk disclosed his approximately 9% stake in Twitter.

Bret Taylor, Twitter’s Independent Board Chair, highlighted:

 The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.

Parag Agrawal, Twitter’s CEO, highlighted on Twitter

Twitter has a purpose and relevance that impacts the entire world. Deeply proud of our teams and inspired by the work that has never been more important.

How did Elon Musk secure the funding to purchase the company?

He secured $25.5 billion of fully committed debt and margin loan financing and is providing an approximately $21.0 billion equity commitment.

Related Case Studies

History of Tesla

history-of-tesla
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor, and after that, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences until 2018. And yet, by 2021, Tesla will become a trillion-dollar company.

Tesla Business Model

tesla-financials
In 2021, Tesla generated over $53.8 billion in revenues, compared to $31.5 billion in 2020. The largest segment in automotive sales (comprising regulatory credits revenues), followed by leasing (as part of the automotive), generated $1.6 billion in 2021. Outside the automotive sales, services (non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, and more) accounted for $3.8 billion. And energy generation and storage accounted for $2.8 billion. US and China are the primary markets, with almost $24 billion and nearly $14 billion respectively, in 2021. In 2021, Tesla generated $5.6 billion in Net Income, a net margin of over 10%.

Real-Time Insurance Business Model

real-time-insurance
A real-time insurance business model enables Tesla to build its insurance arm by dynamically adjusting the premiums based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm, will allow Tesla to scale its demand side of the business.

Tesla Organizational Structure

tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the company’s strategic direction, with international operations given little autonomy.

How Does SpaceX Make Money

how-does-spacex-make-money
– SpaceX is a space transportation service and manufacturer of space rockets and other transport vehicles. Elon Musk founded it in 2002. – SpaceX makes money by charging governmental and commercial customers to send goods into space. These goods include ISS supplies, infrastructure, and people and satellites for various purposes. – SpaceX is also creating its Starlink network, designed to give every citizen access to fast and affordable internet.

Twitter Business Model

how-does-twitter-make-money
Twitter makes money in two ways: advertising and data licensing. In 2021, Twitter generated $4.5 billion from advertising and $570 million from data licensing. While Twitter generated $5 billion in total revenues, it lost 221 million.

Read Also: Tesla Business Model, Elon Musk Companies, Who Owns Tesla, Transitional Business Models, Tesla Competitors.

Read Also: Who Is Elon Musk? The Elon Musk’s Story, How Does Elon Musk Make Money, Elon Musk Companies, Bill Gates Companies, Jeff Bezos Companies, Warren Buffett Companies.

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