Tesla Inc., the electric vehicle and clean energy company based in Palo Alto, California, is famous for its products in electric cars, home to grid-scale battery energy storage, solar panels, and solar roof tiles. The company’s focus is on the global transition to sustainable energy. However, Tesla’s exponential growth and skyrocketing share prices have always been a cause of intrigue and curiosity for shareholders as the company has grown exponentially and championed a technology in a product segment where their predecessors have failed.
Tesla has consistently positioned itself as the market leader in clean technology, especially in the automobile segment. In 2019, Tesla topped the charts as the world’s best selling plug-in and battery-electric passenger car manufacturers. The company held a market share of 17% in the plug-in segment and 23% in the battery-electric segment. In comparison to 2019, Tesla posted a 35.8% increase in sales and sold a total of 499,550 units in 2020. But how did the company get this far in such a short span and who are the people behind this growth? Let’s take a look.
Tesla Inc. was initially founded as Tesla Motors in response to an opportunity accidentally created by General Electric in 2003 when they recalled all the EV1 electric cars and destroyed them. At that point, there was an accepted correlation between high performance and low mileage. That is when Martin Eberhard and Marc Tarpenning saw the opportunity to break this myth and bridge the gap by incorporating Tesla Motors on July 1st, 2003. Their vision for Tesla was not limited to car manufacturing alone. They wanted Tesla to be a technology company as well. Shortly they were joined by Ian Wright, Elon Musk, and J.B.Straubel, and together the five of them declared themselves the co-founders of Tesla Motors.
After a successful Series A and Series B rounds led by Musk in 2006, Tesla launched its prototype car, the Roadster. Eventually, the Roadster production began in 2008. Musk played an active role in the product design of the Roadster. The idea was to first launch a premium sports car to attract early adopters followed by a gradual transition to mainstream models such as sedans and compacts. Tesla shareholders were completely in sync with this approach.
The year 2010 saw some landmark developments in Tesla Motors. In May, the company bought a facility in Fremont that by October became the Tesla factory for the production of Model S. While in June 2010, Tesla Motors launched an IPO on NASDAQ and became the first American car company to do so after Ford Motors, way back in 1956.
Since the Tesla IPO, with the influx of a series of private equity as well as post-IPO debt and equity funding, the company blazed forward launching a string of new models and acquiring strategic businesses. Here is a snapshot:
- In 2017, Tesla Motors was rechristened as Tesla Inc. Model 3 sedan sales began, and for the first time, Tesla made it to the Fortune 500 list.
- Delivery of Model Y crossover began in early 2020
- In July 2020, Tesla Inc. became the world’s most valuable automaker by market cap at a value of $206 billion that was even beyond Toyota’s $202 billion marks.
- In December 2020, Tesla Inc. reported that its market cap had exceeded even the next nine largest automakers combined.
- Acquisitions: Between 2015 to 2020, Tesla acquired many businesses such as Riviera Tool LLC (stamping die systems), Grohmann Engineering (Engineering automation systems), SolarCity (solar energy services), Perbix (automated manufacturing equipment), Compass Automation (custom automation systems to optimize production), Maxwell Technologies (energy storage and power delivery solutions for automobiles), DeepScale (perceptual system technologies for automated vehicles), Hibar Systems (advanced automation solutions for small cell batteries), German ATW Automation (Assembling battery modules and packs).
After the exit of Martin Eberhard and Marc Tarpenning in 2008, Elon Musk emerged as the pioneer within the company, leading product designs and a series of successful investment rounds. As of today, here is the top management of Tesla Inc:
|Elon Musk||2004||Co-founder, CEO, Product architect||Co-founder PayPal, Founder, CEO, CTO of SpaceX, former chairman of Tesla Inc, former chairman of Solarcity|
|Kimbal Musk||2004||Director||Board member SpaceX, entrepreneur, social worker|
|Ira Ehrenpreis||2007||Independent Director||General Partner at Technology Partners|
|Antonio.J.Gracias||2007||Independent Director||CEO & Chairman of investment committee at Valor Equity Partners|
|Robyn Denholm||2014||Chairwoman||Former CFO & Head of strategy of Telstra|
|James Murdoch||2017||Independent Director||Former CEO of 21st century Fox|
|Larry Ellison||2018||Independent Director||Co-founder, Chairman & CTO of Oracle Corporation|
|Kathleen Wilson-Thompson||2018||Independent Director||Senior VP & Chief Human Resources Officer of Walgreens Boots Alliance|
|Hiromichi Mizuno||2020||Independent Director||UN special envoy of Innovative Finance & Sustainable investments, former executive MD & Chief investment officer of Japan’s Govt. Pension Investment Fund.|
Sales and Revenue
As of 2019, Tesla Inc. clocked a total of $23,047 million in sales in the automotive segment, which was 15.78% higher than the previous year, while the energy generation and storage segment posted sales worth $1,531 million. If market reports are to be reviewed, these sales numbers are following an upward curve. In Jan 2021, Tesla Inc. announced that they had hit the goal of half a million cars in production in 2020. A breakdown of the net sales of Tesla Inc. looks like this:
- Automotive vehicles – 81.2%
- Services – 9.1%
- Energy generation and storage – 6.2%
- Automotive leasing – 3.5%
As per existing financial data, the company has proved to be a gold mine for Tesla shareholders. However, it is interesting to note how the company has managed to sustain growth over the years despite facing backlash due to product setbacks. Let’s take a closer look at the equity structure of Tesla:
Equity structure in Tesla
Tesla Inc. is a holding company of multiple subsidiaries but it does not completely own many of them. Thus Tesla Inc. has two types of equity – shareholders equity and minority interest equity. Besides, since the beginning, the company has relied heavily on both long-term and current interest-bearing debt instruments. Tesla shareholders have been well aware of this strategy throughout. However, the balance between the company’s total debt to equity ratio in the last five years has been an interesting journey to observe. Here are the highlights:
- In 2015, Tesla Inc.’s total debt to equity ratio was the highest when the total debt was four times that of equity. This has been the highest in the company’s history so far. At that point, almost 90% of the company was financed by liability.
- In 2016, the company made a large equity issuance to raise capital. Thus by 2Q 2016, the total debt to equity ratio dropped from 4.4 to as low as 1.8. Ever since Tesla Inc. has managed to keep this ratio progressively low. In fact, between 2018 and 2020, the company issued more shares in comparison to borrowing debt. Thus Tesla’s capital structure gradually moved away from borrowing extra loans and shifted towards equity funding.
- The next chunk of massive Tesla equity issuance happened in 2020 when the company issued 3 million shares and raised a sum of $2.31 billion. Thus by 1Q 2020, the total debt to equity ratio further dropped to 1.5 and kept dropping until it reached a figure of 0.9 by the 3Q. This has been the lowest ratio in the history of the company since 2015.
- As of 3Q 2020, Tesla’s balance sheet structure is 60-40. 60% is the liabilities component while 40% is the equity component. Though the company has undergone a steady structural change in the last 5 years, overall total debt remains the main source of financing.
Tesla funding rounds
Tesla has had an inspiring funding history since its inception. After the initial operating funds provided by Martin Eberhard and Marc Tarpenning, Elon Musk became one of the primary investors and led consecutive funding rounds to secure the capital needed for Tesla to grow at its pace. Here are some important milestones in Tesla’s funding history:
- 2004: Martin Eberhard, Marc Tarpenning, and Ian Wright together led the Series A round for $7.5 million. Of this, Elon Musk was the chief investor and contributed $6.5 million. The other $1 million came from Compass Technology Partners. After this funding round, Musk became the chairman of the Tesla Motors board of directors and appointed Eberhard as the CEO.
- 2005: Elon Musk led the consecutive Series B funding round where Valor Equity Partners came on board. A total of $13 million was raised in this round.
- 2006: The next massive funding round, the Series C round, was co-led by Musk and raised $40 million. Apart from Musk and Valor Equity Partners, a series of strong investors became Tesla shareholders in this round – Vantagepoint Capital Partners, Capricorn Investment Group, Compass Technology Partners, Draper Fisher Jurvetson, Google, J P Morgan Securities Inc, Larry Page, Nick Pritzker, and Sergey Brin.
- 2008: The fourth round was debt-financed for $40,167,530 and with this Tesla’s total investments crossed over $100 million, all in private finance. The investors who participated in this round were Elon Musk, Technology Venture Partners Us, The Westly Group, Valor Equity Partners, and Vantagepoint Capital Partners.
- 2010: Tesla entered a strategic partnership with Toyota. Toyota purchased Tesla common stock for $50 million. This was immediately after the Tesla IPO. Together they built an electric version of the RAV4 EV.
- 2016: After a series of post-IPO equity and debt rounds, in 2016 Tesla raised its next massive post-IPO equity for $ 1,460,000,000. Goldman Sachs, Bank of America Merrill Lynch, Deutsche Bank, Citigroup, and Morgan Stanley were the investors in this round.
- 2017: The most recent round of post-IPO equity was granted by Tencent for $ 1,700,000,000.
Top 10 Shareholders of Tesla Inc
Tesla shareholders can be categorized into individual stakeholders, mutual fund holders, and other institutions. Institutional ownership stands at 42.46% shares outstanding which are on par with the Motor vehicles industry average. This equity holding amounts to $403.5 million shares. The overall share distribution looks like this:
- Individual shareholders – 6.33%
- Mutual fund holders – 27.32%
- Other institutions – 15.14%
The top ten Tesla shareholders are:
|SHAREHOLDERS||STAKE||NO. OF SHARES|
|Capital Research & Management Co||5.51%||52,248,658|
|The Vanguard Group, Inc.||4.38%||41,481,097|
|Baillie Gifford & Co||3.66%||34,706,535|
|BlackRock Fund Advisors||2.74%||25,950,983|
|Jennison Associates LLC||1.98%||18,743,418|
|SSgA Funds Management, Inc||1.66%||15,754,590|
|Fidelity Management & Research Co.||1.52%||14,413,311|
|Goldman Sachs & Co. LLC||1.14%||10,801,917|
|JPMorgan Investment Management||0.92%||8,683,229|
Tesla Initial Public Offering (IPO)
In 2010, Tesla Inc. registered on NASDAQ with an IPO. The Tesla IPO at that point was priced at $17 per share. The company has grown and expanded exponentially since then and as of Feb 1st, 2021, Tesla shares were priced at $839.81 per share. Here is a closer look at the chronology of events:
- On 29 January 2010, Tesla Inc. filed its IPO with the US Securities and Exchange Commission. This IPO was underwritten by Goldman Sachs Group, Morgan Stanley, JP Morgan Chase & Co., and Deutsche Bank.
- On 21 May 2010, Tesla Inc. entered a strategic collaboration with Toyota Motors who agreed to invest 2.5%, i.e. stakes worth $50 million. This joint venture aimed to build a state of the art electric vehicle.
- On 29 June 2010, Tesla Inc. launched the IPO on NASDAQ by offering 13.3 million shares priced at $17 per share. This IPO raised a total of $226.1 million for the company. On the very first day of the Tesla IPO, the company shares increased by 40.53% and closed at $23.89.
The composition of Tesla shareholders is a good example of multi-linear equity holding patterns. A company growing as massively as Tesla, to manage, track, and distribute equity with utmost precision is always a challenge. Hence it is best to use automated equity software such as Eqvista from the very beginning of company operations. All your equity needs can be handled easily with a click of a button. Here is a consolidated list of our services. To know more, reach us today.