Name: If You Bought Tesla Stock at IPO, How Much Would You Have?
Uploaded: 2020-02-26T03:20:44.000Z
Duration: 5 min 25 s
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There's no other automotive company quite like Tesla. The electric vehicle manufacturer

has upended the automotive world since its initial public offering in 2010.

After initially producing a concept car roadster, Tesla moved on to the Model S; a high-end

sedan that proved that Tesla could make electric vehicles that were, both, practical and tons

of fun to drive. Tesla has since gone on to produce its SUV, the Model X, and its first

mass-market car, the Model 3, in addition to upcoming vehicles, including the Model Y

and the all-electric pickup truck called the Cybertruck.

Despite years of skepticism from some investors, the company has not only delivered on building

industry-leading electric vehicles but its stock price has skyrocketed as well.

Tesla's stock price was up 26% at the end of 2019, thanks to a surge in the company's share price

following a third-quarter report that beat profit expectations as well as some help from

House Democrats, who've considered introducing a bill that would bring more tax credits for

electric vehicle buyers. Over the long haul, Tesla's stock has been

massively profitable for early investors, even if the company itself is currently unprofitable

as it invests in disruptive growth. But just how well have early shareholders made out?

In this episode of the bottom line, we're crunching the numbers to see how much a $5,000

investment in Tesla's IPO will be worth today? It's important to remember that none of Tesla's

recent successes was assured when the company went public back in 2010. All investors had

to go on was the belief in Elon Musk and his vision to create the first new public automotive

company in the U.S. since 1956. That took a major leap of faith for investors,

but it was an even riskier bet considering that Tesla was creating an all-electric vehicle, a concept

that much larger and well-established automotive companies had failed to produce profitably.

With little more than a vision, leading technology and a serial-entrepreneur with a great track

record at the helm, Tesla's stock went public at just $17 per share back on June 29th, 2010.

On the first day of trading, Tesla's stock shot up over 40% to almost $24. Even if you

were a public investor who didn't get in on the pre-trading IPO price, you still would

have made a small fortune. Today, Tesla's stock trades for around $500 per share.

Nearly 30 times its IPO price and over 20 times the price at the end of its first day of trading.

That's a total return of 2,500% from the initial IPO price.

To put it another way, if you had invested $5,000 and had been lucky enough to get in

at the IPO price of $17 per share, your Tesla stock would be worth over $125,000 today.

Over nine years and seven months, that's an average annual return of more than 40%.

Of course, riding Tesla's share price rise hasn't always been easy. Tesla has long been

controversial and even today many prominent investors, such as, Jim Chanos and David Einhorn

are short Tesla's stock. Musk and Einhorn even got into a war of words on Twitter recently,

with Musk taunting Einhorn's losing short bet and Einhorn challenging Tesla's truthfulness

regarding its financials. Controversy has always followed the company, even when its

price was just a fraction of where it is now. And short interest in Tesla has hovered around

20% of total shares outstanding since 2012. It was impossible to imagine the incredible

success Tesla would have in the market when it went public back in 2010, but it wasn't

hard to know that Elon Musk was smart, tech-savvy and had the vision to launch a highly disruptive product.

Musk's pitch was that Tesla had unmatched speed of innovation that could catapult it

past large, bureaucratic and outdated incumbents. And given its recent results, it appears Tesla

is achieving that promise. Of course, exciting growth companies don't always work out,

but the lesson for investors is that speculation on disruptive growth companies with highly

invested Founder-CEOs can sometimes pay off and in a big way. As long as you're well diversified,

the returns on just one Tesla type company, if held for the long-term, can make up for

many other growth investments that don't perform. Tesla seems well on its way to making history.

And while the stock may not generate the massive returns of the past nine years, there's no

doubt that this company will be exciting to watch.

Thanks for watching this video! Do you think Tesla's share price will continue climbing?

Let us know in the comments below. And if you liked the video and want to know how our

analysts break down companies, get our free investing starter kit over at fool.com/start.