How Fred Smith rescued FedEx from bankruptcy by playing blackjack in Las Vegas

Fred Smith took FedEx's last $5,000 and won $27,000 playing blackjack in the company's early years

Within a few years of starting FedEx, Fred Smith made a real gamble to keep the company afloat.

Smith founded the Federal Express in 1971 and it began operations in 1973. The company was based on an idea he wrote about in a term paper in 1965 while he was an undergraduate student at Yale.

In his paper, he explained how companies could deliver items faster if they changed their shipping strategies, according to the FedEx website. However, Smith’s professor didn’t think the idea was possible, so Smith's paper was only given a C, Entrepreneur magazine reported in 2008.

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Smith wasn't deterred. After he graduated from Yale and served in the Marine Corps for two tours of duty in Vietnam, Smith bought controlling interest in Arkansas Aviation Sales in 1971, the FedEx website said.

With his new company, Smith realized how difficult it was to ship items within a few days, so he decided it was time to try to put his Yale term paper to use.

According to Entrepreneur, Smith raised $80 million in loans and equity investments by the end of 1972.

FedEx founder and CEO Fred Smith is also a part owner of the Washington Redskins. (Redskins.com)

FedEx began operations in April 1973 and quickly grew. However, rising fuel costs eventually caught up with the young company, putting FedEx millions of dollars in debt, Entrepreneur reported.

Investors declined to give FedEx more money and Entrepreneur reported that "bankruptcy was a distinct possibility."

When the company had only $5,000 left, Smith pitched General Dynamics for more funding, but the board refused.

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On his way home, Smith took a detour to Las Vegas and won $27,000 playing blackjack, which he wired back to FedEx, Forbes reported.

"The $27,000 wasn't decisive, but it was an omen that things would get better," Smith said about the gamble, according to Entrepreneur.

"I was very committed to the people that had signed on with me, and if we were going to go down, we were going to go down with a fight," he said. "It wasn't going to be because I checked out and didn't finish."

Fedex CEO Fred Smith is pictured at a business roundtable meeting in 2012. (REUTERS/Jason Reed/File Photo)

After his blackjack win, Smith was able to raise another $11 million, the magazine reported. And by 1976, FedEx's revenue had reached $75 million, according to Forbes. The company went public two years later.

According to the company website, FedEx reported $1 billion in revenue in 1983. Though it was hit hard by the 2008 recession, the company has bounced back.

According to Forbes, the company made $69.7 billion in revenue last year.

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Smith, who is still the CEO and chairman of FedEx, is estimated to be worth $3.9 billion, according to Forbes’ real-time net worth calculator.

Ticker Security Last Change Change %
FDX FEDEX CORP. 229.12 +1.67 +0.73%

Though gambling FedEx’s last $5,000 was a risky choice, Smith doesn't appear to regret his decision, according to a quote from an essay by Smith that Forbes published in 2017.

"No business school graduate would recommend gambling as a financial strategy, but sometimes it pays to be a little crazy early in your career,” Smith wrote.

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