Small role in Tesla plan for Saudi fund

ELON Musk told investors this week that “obviously, the Saudi sovereign fund has more than enough capital needed” to finance taking Tesla private.

The fund is estimated to have over US$250 billion in assets. But it is not that simple.

The Public Investment Fund has many claims on its resources, both financial and political.

More than half of its assets are tied up in large Saudi companies whose stocks could be difficult to sell en masse.

The PIF has made substantial commitments to other technology companies or investments, including a US$45 billion agreement to invest in a giant tech fund led by Japan’s Softbank.

Then there’s US$3.5 billion invested in US ride-sharing firm Uber, the US$1 billion pumped into Virgin Group’s space ventures, and another US$20 billion tentatively committed to an infrastructure investment fund planned with Blackstone.

There is also pressure to spend money at home, where a slumping economy has driven unemployment among Saudi citizens to record highs.

“They could handle part of taking Tesla private, but not necessarily a large part of it and certainly not all of it,” a banker at a major Gulf firm operating in Saudi Arabia said.

Musk has not put a formal buyout proposal to Tesla’s board, the company said on Tuesday.

The Tesla CEO has said he does not believe he would need to raise the full US$72 billion value placed on Tesla by his US$420-a-share bid because he expects many existing shareholders – including himself with 20 percent of the company – to roll their shares into a private Tesla.

The Saudi PIF already holds about a 5 percent stake in Tesla.

Participation in a Tesla deal could bring Saudi Arabia closer to developing a domestic car industry or playing a role in Musk’s electric battery manufacturing or space activities.