Would Elon Musk have become a trillionaire without the US government?
SpaceX shares jumped 19% on their Nasdaq debut Friday, pushing the company’s market capitalization beyond $2 trillion, making the aerospace company the sixth most valuable US company and turning Musk into the world’s first trillionaire.
The billionaire’s (oops, trillionaire’s) entrepreneurial success has been supported not only by technological innovations developed by his companies and investor confidence, but also by significant public support. This is highlighted in a recent report by CNN Business which states that Elon Musk owes a significant part of his rise not only to innovations developed by his engineers or the trust granted by Wall Street, but also to support provided by the US government. Without federal intervention, neither Tesla nor SpaceX would have been able to overcome the difficult early stages of their growth.
Already last year, a report from the Washington Post (whose publisher is the other American billionaire, Musk’s rival in the aerospace sector with Blue Origin, Jeff Bezos) highlighted that “Elon Musk’s business empire is built on $38 billion in government funding.” In particular, government interventions at key moments helped Tesla and SpaceX thrive, increasing Musk’s wealth.
At the most delicate moments of their growth, both SpaceX and Tesla benefited from government funding, contracts, loans, and incentives that contributed to their survival and subsequent expansion. According to Ross Gerber, CEO of investment firm Gerber Kawasaki and among Tesla’s first investors, “They (Tesla and SpaceX) would not exist if it weren’t for the government,” notes CNN.
All the details.
THE FEDERAL CONTRACTS ON WHICH MUSK BUILT HIS EMPIRE
Although SpaceX had not yet successfully reached space, NASA awarded the company a $278 million contract in 2006 as part of a program for transporting supplies to and from the International Space Station (ISS) aimed at developing the Falcon rocket and Dragon capsule.
That contribution represented the first piece of over $500 million in public funding received by the company in its early years. According to Casey Dreier, head of space policy at the Planetary Society, “That was about half of the capital they had raised up to that point” and “It was a substantial commitment by NASA,” reports CNN.
In 2008, SpaceX’s Falcon 1 successfully reached orbit, and NASA awarded the company a much larger contract, worth $1.6 billion, the Post already reported last year.
NASA’S RECOGNIZED ROLE
Musk himself acknowledged the decisive role of the American space agency. In 2012 he stated: “The fact is we could not have founded SpaceX, nor could we have reached this point, without NASA’s help,” on the occasion of the first launch of the Falcon 9 rocket to the ISS.
In recent years, NASA has awarded SpaceX contracts with a total value exceeding those from the Department of Defense, totaling $13 billion in contractual commitments over the last decade. These agreements include hiring SpaceX to deliver cargo and astronauts into orbit and to send NASA’s largest and most expensive probes into the universe.
Furthermore, according to an in-depth report last year by the New York Times, SpaceX had already become one of the largest contractors of the US government even before the start of Trump’s second term, securing $3.8 billion in commitments for fiscal year 2024 spread across 344 different contracts.
BENEFITS OBTAINED FROM PRIVATE INVESTORS
While NASA achieved significant returns thanks to the development of private space transportation capacity, the greatest economic benefits went to the investors who supported the company in its early years, notes CNN.
As Dreier observed, “The people who invested the other half of the capital at that time are about to become multibillionaires.” The growth in SpaceX’s valuation has indeed multiplied the value of the shares held by the early private investors.
SAME SUPPORT FOR TESLA
Musk’s other bet, Tesla – the electric car manufacturer – also benefited from decisive public support.
In January 2010, Tesla had sold fewer than 2,000 cars in its entire history, almost all somewhat peculiar electric models based on Lotus sports cars, reconstructs CNN. Then, a few months before its initial public offering, the company received a low-interest loan of $465 million from the Department of Energy. With this loan, the company developed the Tesla Model S sedan, its first major success. Tesla repaid the loan early with proceeds from a further stock sale in 2013.
Subsequently, tax incentives aimed at electric vehicle buyers supported demand for the group’s cars, while the emissions credit system generated over $14 billion in revenue for Tesla over the years, providing an essential contribution to the company’s accounts during times of greatest difficulty.
According to CNN Business‘s analysis, the role of public aid should not be measured only in terms of the amount of resources received, but especially considering the timing of their disbursement. Government funding arrived when the two companies were still high-risk startups struggling to attract sufficient capital from the market. Only later did investor confidence and market valuation growth help transform Musk into the richest man in the world, the first trillionaire in history.
