Investing in Tesla (NASDAQ:TSLA) back when it first appeared on the market would have been a stellar move. Looking back at growth stocks and charting their winning history can be a handy little experiment. Especially with a modest £1,000 lump sum. As investors we have limited funds, but so many options.
There’s also an easy lesson to learn about leadership. As a CEO there could hardly be a more divisive figure than Elon Musk.
My wife, for example, thinks he’s a dangerous chancer. My friend Eric, who owns a Model S, hangs on his every word.
Whatever your opinion, one thing is quite clear. If I’d invested £1,000 into Tesla on the day of its stock market debut, I probably wouldn’t be writing this article now.
Instead I might be pouring champagne on my breakfast cereal, and probably awaiting delivery of my Cybertruck.
Stock market boom
Tesla’s June 2010 initial public offering (IPO) will go down in history for a couple of reasons. To start with, it became the first US carmaker to go public since Ford in 1956.
Second, the company was wildly unprofitable at the time.
Tesla would rack up net losses of $3.2bn (£2.5bn) before ever turning a profit. The company lost money for 26 financial quarters in a row. That’s more than six years for investors holding a loss-making stock!
And yet the South African CEO is now the richest man in the world, according to the Bloomberg Billionaires Index. His net worth is around £200bn, give or take a few million here or there.
His ownership stakes in SpaceX and Tesla account for most of this wealth. The rocket and space exploration company is worth around $175bn, but is not publicly traded. The electric car and battery storage brand? From unlikely beginnings it has forced its way into the top 10 most valuable companies in the world.
Working out our winnings
To figure out the total, we need to look at not just how Tesla stock has performed since 2010. We also need to add in technical changes to the stock itself.
Tesla went public at $17 a share on its debut. But it also underwent a five-for-one stock split in 2020, then another three-for-one stock split in 2022.
A ‘stock split’ is when a business increases the number of shares available to buy and sell on the market. Early investors got their share allocation quintupled, then tripled again. So to be accurate, we need to divide the IPO price of $17 a share by 15. Because one share of Tesla would be equivalent to 15 shares by 2023.
This adjusted IPO price comes out at $1.60. Tesla’s most recent close price in mid-December 2023 was $240.
So my £1,000 would be worth 14,900% more, at just under £150,000 today.
How to profit
So investing in Tesla today? Would that be a good use of £1,000? It’s hard to argue against, but perhaps not because Cybertruck sales will wow analysts. I see Tesla’s battery storage tech, like Powerwall and Megapack, as the company’s biggest growth engine.
The point is not to torture ourselves with the one stock that got away. It’s simply to remind us that long-term bets, if well-researched, and held for years, can be our best investments.
