Elon Musk: Government’s $5 Billion Man
A little help from his friends. View Enlarged Image
Capitalism 2015: In corporate finance today, the theme is “Go where the money is.” For Elon Musk, CEO of Tesla, SolarCity and SpaceX, the place to hunt for cash isn’t Wall Street or even Silicon Valley. It’s Washington, D.C.
Musk is one of the hottest CEOs in the country, and Tesla stock has been a strong performer. But one key to Musk’s success is that his companies have, according to an analysis by the Los Angeles Times, gathered in $4.9 billion of taxpayer subsidies over the past several years — everything from grants and loan guarantees to property-tax abatements and federal tax credits for buying his products.
Musk is the new king of corporate welfare, and he’s starting to make Florida’s Fanjul family, which lives off sugar subsidies, or former Archer Daniels Midland CEO Dwayne Andreas, who cashed in on ethanol mandates and subsidies, look like pikers.
Many Wall Street observers say investors are gambling that Musk can cut his costs before the taxpayer money runs dry.
But it might be that he and his backers are betting that the tax dollars will never stop flowing, like a fiscal perpetual motion machine.
This is what is meant by “public-private partnership.” It says a lot about the U.S. economy and the role that big government plays that those who reach the top of the federal subsidy mountain are Wall Street’s darlings.
Nearly all of Musk’s corporate activities — building electric cars, producing solar panels and launching rockets into space — depend on government’s largesse.
The secret to his success is finding out what the Obama administration and other politicians want, then starting to produce it — regardless of whether it’s commercially viable.
As we’ve noted, the solar panel scam is so costly that the government in many cases is paying homeowners to put Musk’s product on their roof.
Then earlier this year, Musk got the state of Nevada to offer him $1.3 billion in incentives to move one of its factories to Reno. The Times reports that he also persuaded New York to kick in an estimated $750 million for a SolarCity plant in Buffalo.
How does he do it?
Musk was challenged on CNBC this week about the size of the subsidies that he rakes in every year. He said that they’re “helpful” and create jobs. He defended the government support as necessary because “what the incentives do is they are catalysts. They improve the rate at which a certain thing happens.”
Read More At Investor’s Business Daily: http://news.investors.com/ibd-editorials/060515-756051-elon-musk-made-it-big-with-grit-ability-and-some-help-from-the-government.htm#ixzz3cGHKVmmB
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