Tesla CEO Took Private Jet to Washington D.C.
Tesla Motors CEO Elon Musk has flown his private jet to Washington at least 12 times since the beginning of last year—just months after Congress chastised the CEOs of GM, Chrysler and Ford for flying private jets to request public financing.
FAA records collected by FlightAware.com show that Musk’s jet, a Dassault Falcon 900, touched down in Washington June 15, 2009 – one week before the electric car maker won a guaranteed $465 million loan from the Department of Energy. Two weeks before that, Tesla began paying for the jet’s operating expenses. This worked out to $175,000 in costs for the final six months of 2009, according to a recent registration statement with the SEC (Tesla is planning to raise $100 million via an IPO).
Since Tesla started paying for Musk’s work-related flights, the CEO’s plane went to Washington four more times, touching down on June 15, Sept. 7, Sept. 27, Nov. 4 and once since the new year began, records show.
Musk also may have used the plan for business related to SpaceX, a commercial rocket-ship maker that also runs. The plane also could have been used for non-business purposes. For example, it was used in the making of the 2005 movie “Thank You For Smoking.”
An industry source says jets of similar make and age sell for between $5 million and $10 million, depending on a variety of variables, and can cost around $5,000 per hour to operate.
It is not unusual for technology company CEOs to fly privately-owned jets and expense their use to the company. Apple CEO Steve Jobs, for example, billed the computer maker $16,000 for use of his Gulfstream for the nine months ending in June 2009. Google gave CEO Eric Schmidt $106,201 for “costs related to aircraft chartered for Google business on which family and friends flew in 2008.”
But Tesla is no Apple or Google, and it’s highly unusual for a startup CEO to be recording such expenses against the company he runs.
“It’s really not normal and I don’t think it’s actually right,” says Ho Nam, a venture capitalist with Altos Ventures which does not own any stake in Tesla. “It’s okay to expense what it would have cost to fly commercial, but the difference should be covered by the person using it. It’s really about the culture and the message it sends to the rest of the company.”
If the CEO is perceived to be spending a lot of money, lower-level employees will be less likely to try to save money, Nam adds.
We left a message for Tesla this morning, but have not yet heard back.
Tesla’s Owners
In addition to the $465 million in federal loans, Tesla also finalized an arrangement with the California Alternative Energy and Advanced Transportation Financing Authority that exempts it from up to $320 million in California state sales and use taxes, according to regulatory documents.
These federal and state funds should benefit an array of Tesla investors, Musk foremost among them. The Tesla CEO owns 81 million shares of Tesla Motors stock (38.8%) and is slated to receive another three million shares based on options he owns that may be exercised by the end of February, documents show. He only took $1 in annual salary during 2009, but the company is required to pay him $33,280 under minimum wage laws. Moreover, Tesla awarded him options worth nearly $24 million in 2009.
Other big shareholders include Al Wahada Capital Investment, a wholly-owned subsidiary of the government of Abu Dhabi, which owns 22 million shares of Tesla’s pre-IPO stock (10.5%) and an investment fund 40% owned by German automaker Daimler and 60% owed by the government of Abu Dhabi, which also owns 22 million shares (10.5%).
CEO Elon Musk’s younger brother and Tesla board member, Kimbal Musk, owns 1.2 million shares (0.03%).
The venture capital firms associated with Tesla also have substantial stakes. VantagePoint Venture Partners owns 21 million shares (10%), Valor Equity Partners own nearly 15 million shares (7.1%), Draper Fisher Jurvetson owns 8.3 million shares (4%) and Technology Partners owns 8.2 million shares (3.9%).
bob said on February 10, 2010
Class act should be a real cheap roadshow. Nice to see the govt bailing out venture backed companies.
BC said on February 10, 2010
So, either lawmakers should _not_ have given GM, etc., grief for taking private jets to Washington to ask for money, or they _should_ give Tesla grief. Either way this is a huge story.
BBSwany said on February 10, 2010
@bob, Tesla wasn’t given bailout money like GM and Chrysler. They were there to secure a government grant program for electric vehicles.
I still don’t like the climate of a company that flies private, while filing an IPO, while NOT having a vehicle to sell… Seems pretty fishy toe.
Alex said on February 10, 2010
this is called self entitlement.
Musk looks for govt backing and them spends on private jets. What a joke!
Howard said on February 11, 2010
I know it doesn’t smell quite right, and he could’ve and probably should’ve flown commercial.
HOWEVER, remember that Musk is taking a $1 salary as CEO (reported in the S-1). It’s not quite the same thing as the other automakers. He’s not looking to get rich(er) based on salary, but on value creation.
bob said on February 11, 2010
To BBSwany a govt loan to a company whose product exists only on paper sounds like a bailout to me. The only positive is I have heard the interest rate is 12%. The fact that he is making a buck a year is not a big deal look at his stock position. I wonder if it was options or did he actually put money in the company.
Rob said on February 11, 2010
You are completely wrong on your cost estimates.
The aircraft in question, owned 100% by Musk is a Falcon 900B, SN 139 registered as N900SX.
The current (2010) direct operating costs of a 900B as per JetNet is $ 1713.11 per hour.
Alexander Haislip said on February 11, 2010
@Rob, thanks for the clarification on the operating cost.
Michyael said on February 12, 2010
In regards to being “Tone Deaf†Isn’t the Tesla situation a little different than the big 3 automakers?
In the case of the former (I haven’t followed the story that closely) but my impression is that this is a new company, creating jobs, and is creating a green technology that is zero emissions, etc – the reason that the government is so happy to give the loans as it supports some elected officials’ political agenda/scorecard – it was a loan from the Department of Energy, not TARP.
Contrast that with the big 3 bailout, saving a few jobs in a dying industry with an over-unionized workforce and under-invested capital base. The fact that he took a private jet actually proves the point that he has the upper hand, whereas the big 3 guys did not.
I think its just a balance of power issue