The PayPal Stake That Built SpaceX

In 2000 Elon Musk was the chief executive of the fast-growing online payments company that would soon be called PayPal, and a boardroom change that fall moved him out of the role. The shares he kept afterward paid for SpaceX.

The boardroom change

Elon Musk had started an online bank called X.com in 1999. In 2000 it merged with a rival called Confinity, which made a popular payment tool named PayPal and was run by Peter Thiel and Max Levchin. Elon became chief executive of the combined company, but the merger was tense. There were fights over which technology to build on and over whether to keep the X.com name or the PayPal name. In the fall of 2000, while Elon was on a plane heading overseas for a delayed honeymoon and a fundraising trip, executives and board members moved against him and voted to install Peter Thiel as chief executive. He learned that he had been replaced while he was still traveling.

Why he did not walk away

Founders replaced as chief executive often fight back or sell out, but Elon Musk stayed on the board, remained the largest shareholder, and kept backing the business even though he no longer ran it. He kept his ownership of the company, and that stake paid for what came next.

The payout that built SpaceX and Tesla

In 2002 the online marketplace eBay bought PayPal, and Elon Musk's stake turned into about $176 million before taxes, his 11.7% share of the $1.5 billion deal. He put most of it into SpaceX, Tesla, and SolarCity, the solar company his cousins ran, which later became part of Tesla.

The bottom line

Elon Musk had founded SpaceX in March 2002, months before the eBay deal closed that October. In 2004 he put $6.5 million into Tesla's $7.5 million first funding round and became chairman of its board.