A close buddy of mine, (let’s call him John) introduced me to Elon Musk and Tesla Motors in 2017. He is not a finance or investing person but boy was he enamoured over Musk, SpaceX and Tesla.
Thesis for Buying Tesla:
“This is a guy who pocketed 9 digits after selling Paypal. 99.9999% of people would have played defensive from then on.
However, he then borrowed to the hilt and risked everything to build Tesla and SpaceX, potentially consequential endeavors for humankind.
He is the underdog tech billionaire and the odds are stacked against him. But let’s support him and help him with our money!”
Basically, he just wanted to support Elon Musk and was totally prepared to lose his entire investment.
Chronicle Of Purchases And Sales
Jul 2017 (Purchase: 100 shares at $70)
In the middle of 2017, Tesla was facing lots of problems rolling out the Model 3s. John took out his wallet and backed Elon. $7k USD was close to SGD 10k and it was one of his biggest investments then.
“Elon is going to overcome this. He has done it with the Roadster and the Model S. He is going to deliver. These are minor teething problems and Tesla will be worth $200 in a few years’ time.”
3rd Quarter 2019 (No Action)
Tesla was facing another existential threat. Scaling up the production was proving to be a perennial thorn and Elon even tried to privatise the company. The price of Tesla shares hovered at $42 thereabouts, a 40% paper loss for my dear friend.
“Ok, the company might go up in flames but there’s still good odds Elon will come through. This is the last hurdle and there is no legit competitors and demand for the cars is still there. He just needs a bit more time and money to pull it off. Anyway, I am prepared to lose the entire $7k.”
Feb 2020 (No Action)
The worst seems to be over for Tesla as share prices soared to $175. The company is beating expectations and delivering vehicles in numbers promised. John is sitting on a 150% investment gain.
“I told you so. In Elon we trust. HODL!”
July 2020 (Sale: 25 shares at $280)
Announcement of the share split (5 for 1) came through and fueled some crazy prices increases. At $280, John was sitting on a 300% gain and Tesla was the biggest investment in his small portfolio. He came to me for some advice and I promptly told him to pursue the path of least regret.
He decided to cash out a fifth of his stake and sold 25 shares (5 shares pre-split). He basically took out his capital with the $7k proceeds.
“Thanks Elon for letting me stay on with house money! I am still a big supporter of you and Tesla remains my biggest investment.”
August 2020 (Sale: 20 shares at $400)
Within a month from the prior sale, the value of John’s Tesla shares broke through $30k again. It was time to harvest another 20 shares at $400 and rebalance his portfolio.
“Elon is no longer an underdog. He is the one of the top 5 richest people in the world and this whole thing is starting to appear bubblish. I really thought it would take the best part of a decade for Tesla to reach such valuations.”
Early Dec 2020 (Sale: 15 shares at $600)
At this moment, there’s really not much updates or massive changes to the business. Tesla turns solidly profitable but is still some time away from rolling out vehicles en masse. All the news are really all about the price changes, and of course, being included in the S&P 500.
At a price of $600, John’s remaining 55 shares were worth $33k, breaking the $30k barrier again. He sold 15 shares for a proceed of $9k.
“This is getting insane. Elon is possibly now the 2nd richest person in the world. More and more people are getting on this Tesla and Elon bandwagon. But I am getting off. I now hold less than half the shares I had originally. “
Late Dec 2020 (Sale: All remaining 40 shares at $700)
When the share price hit $700, John sold all his remaining 40 shares.
“Elon does not need my money or support anymore. Well, the business is worth almost as much as Facebook now, which is crazy. He is no longer the underdog. He is the alpha alpha. ”
| Dates | Actions | Proceeds |
| Jul 2017 | Buy 100 shares @ $70 | -$7,000 |
| Jul 2020 | Sell 25 shares @ $280 | $7,000 |
| Aug 2020 | Sell 20 shares @$400 | $8,000 |
| Early Dec 2020 | Sell 15 shares @$600 | $9,000 |
| Late Dec 2020 | Sell 40 shares @$700 | $28,000 |
Total Profit: USD $45k
If we convert the profits to SGD, it’s about $60k, close to a median worker’s annual income.
But was it life-changing?
Actually, not really.
His XIRR over the past year is quite monstrous since he made >6x his original investment in 2017. Maybe some bragging rights and $60k is indeed a nice windfall for someone in his mid-thirties.
Moreover, he is not exactly embarking on a FIRE journey and enjoys his work more than most people.
So don’t beat yourself up if you have missed such investments. Whether it’s Tesla, some other stock or cryptocurrencies.
Could he invest in something similar to Tesla again and compound his gains?
Maybe, but the odds are really low. Moreover, he knows he is not a unicorn and is likelier to diversify rather than concentrate. So he would really need multiples of such events. Such monstrous gains for a mega cap (Tesla was a business worth $60 billion in 2017) is also unprecedented.
And what if instead of staking USD $7k at the start, he had put in USD $70k and repeated/maintained all his actions?
Yes, pocketing $600k would definitely be life-changing. However, emotions and probably actions would change if the capital is 10x the original amount. I sincerely doubt he would be as cavalier during the 3rd quarter of 2019 and might even have capitulated there and then. It’s all theory and moot.
As Elon Musk surpasses Jeff Bezos to become the richest man in the world today on 8 Jan 2021, I am sure John’s narrative of Elon Musk is starting to turn 180 degrees. The spell has broken for him.
But how about the rest?
Thank you for reading.
Totally relate to John, the share price is crazily oversold now.
Nevertheless, what I have done differently is that I am buying up the trend from post-split price of 300SGD till the recent high of 600-ish.
It was a speculative play, however, I must admit that it is more like a religious bet now. The success of Tesla is solely in awe of Elon Musk, which could be scary if he pulls a stunt.
Hi Jacky,
Congrats on your good trade!
You are right about the religious investment part and how much of Tesla’s capitalisation is tied to its founder. So someone is really making a big bet if they tie >50% of their investments in this one stock.
Your post is a good reminder that many people always beat themselves up for missing the boat (including myself) and failed to realise that hindsight is always 20/20.
Hi Valuewarrior,
Yes, and the fact that even if one got lucky, it’s also not a boat that will change their lives.
Just the kind of post to remind me why I love coming back to your blog 😉
I definitely agree that the emotional aspect would have resulted in a far more different outcome.
Keep on writing, please!
Hi Kevin,
Thanks for the kind comments and encouragement.
Your blog definitely gave me impetus to put in effort and keep on writing.