Nov 11, 2021, 06:33pm EST |
The Other Musk Getting Rich Off Tesla: Elon's Youngest Brother
Rachel Sandler
I cover the world's richest.
Kimbal Musk attends the Los Angeles Premiere of "The Game Changers" Documentary at ArcLight ... [+] Hollywood on September 04, 2019 in Hollywood, California.
Getty Images for "The Game Changers"
Tesla's rapidly rising share price has made CEO Elon Musk the richest person in the world this year—but he's not the only member of the Musk family cashing in.
Elon's youngest brother, Kimbal Musk, was an early investor in the electric carmaker and has served on the company's board since 2004. It's a lucrative gig. Forbes conservatively estimates that Kimbal Musk has a net worth of about $700 million. That's largely thanks to his 0.04% stake in Tesla, plus options to purchase 172,250 Tesla shares, worth about $170 million as of Nov. 9. He also owns about $2 million worth of stock in Chipotle, where he is also a director, and likely has a stake in SpaceX, Elon Musk's private spaceflight company, where Kimbal also sits on the board.
The youngest son of Maye and Errol Musk, Kimbal grew up in South Africa and went to Queen's University in Ontario, Canada with Elon. (Elon left after two years to finish his degree at the University of Pennsylvania.) After graduating in 1995, Kimbal and Elon cofounded Zip2, a software company that was acquired by Compaq in 1999. After that, he invested in X.com, Elon's next startup, which eventually became part of Paypal, according to CNBC. He joined Tesla's board the same year Elon invested $6.5 million to become the company's largest shareholder and chairman of the board.
Kimbal has invested in Tesla with his own cash and has also been granted valuable stock options over the years as compensation for his board service. Back in 2008, at the height of the recession, Kimbal's personal investments cratered, so he sold his remaining assets and put them into Tesla to help the struggling company stay afloat, according to journalist Ashlee Vance's 2015 biography "Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future." "I was close to bankruptcy," Kimbal told Vance.
It's unclear how much Kimbal invested; a spokesperson would only say he was an "early investor." According to Securities and Exchange Commission filings, Kimbal participated in a 2008 bridge financing round where investors loaned Tesla money in exchange for a convertible note to purchase shares at a discounted rate. Kimbal ended up with 594,857 shares. It's unclear if he has invested any more of his own money in the business over the years.
What is clear: Kimbal's Tesla stake has been highly lucrative for him. Since the electric car maker's IPO in 2010, he has sold nearly $230 million (pretax) worth of Tesla shares. That includes a massive stock sale last Friday, right before Tesla's stock price sank 12% after Elon's Twitter poll about whether he should sell 10% of his Tesla stake sent shares falling. Forbes estimates Kimbal was worth $752 million before the stock fell.
Additionally, Kimbal is using a tried and true tactic of the ultrawealthy to get even more cash: taking out loans against his stock. According to SEC filings, as of July Kimbal had pledged ​​599,740 Tesla shares—every share he owned—as collateral for personal loans. Forbes has discounted his stake in Tesla to account for the pledged stock.
Kimbal's board seat hasn't gone without complaints of nepotism. In 2018, a group of pension fund managers and activist shareholders tried and ultimately failed to oust Kimbal from the board. They argued Kimbal's familial ties prevent him from serving as an independent director. The group also pointed out that Kimbal "has no professional experience in the auto industry" and "has proven ineffective as a public company director at Chipotle." Another proposal in October, from proxy advisory firm Institutional Shareholder Services, attempted to kick Kimbal and director James Murdoch off the board due to what ISS deemed their "excessive compensation" in stock options.
"There is no explanation of why the magnitude of the option awards is so much larger than director compensation at peer companies," a report on the topic ISS reads. ISS declined to elaborate on their proposal.
In a statement, Kimbal did not directly address his net worth, but instead sent Forbes a long missive about his investment philosophy and philanthropy.
"We are inspired by the next generation of young farmers, entrepreneurs, and innovators who are helping combat climate change by growing more nutritious local food, reducing food waste, and creating regenerative as well as plant and cell-based meat," Kimbal said in the statement.
Outside Tesla, Kimbal is a restaurateur and an investor in the food space. Around the same time he joined Tesla's board, Kimbal cofounded The Kitchen Restaurant Group, which operates three farm-to-table restaurant chains across the country. He cofounded urban farming startup Square Roots in 2016 and has invested in meal subscription service Everytable and lab-grown meat company Upside Foods, among other startups. Kimbal also started Big Green, a non-profit that creates gardens at schools and aims to teach students about nutrition, health and food literacy.