Saudis may help take Tesla private
Musk says he’s met with officials from country’s sovereign wealth fund
Tesla Chief Executive Elon Musk on Monday sought to answer some questions about how his company would finance his proposal to take the electric carmaker private, saying that Saudi Arabia’s sovereign wealth fund will likely play a role in Musk’s $420-a-share buyout plan.
In a blog post Monday morning, Musk said that after meeting with the Saudi fund’s managing director on July 31, he felt there was “no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to ‘funding secured’ in the August 7th announcement.”
Musk threw Wall Street for a curve on Aug. 7 when he tweeted out his proposal to take Tesla pri-
vate at $420 a share, and added some mystery by writing “Funding secured” — without providing details. That led to a lot of speculation about Musk’s plans, and a lawsuit accusing Musk and Tesla of securities fraud.
Musk said Monday that officials with the Saudi fund first approached him in early 2017 about the possibility of Tesla going private, and that he has had “several meetings” with fund officials since then to discuss how taking Tesla private could become a reality. Musk said the fund expressed interest in helping Tesla to become a private company as part of the fund’s strategy to diversify its investments away from oil.
“They have made many investments in tech companies in the past,” said
Tim Bajarin, of tech consultancy Creative Strategies, about the Saudi fund’s interest in helping Tesla go private. “Tesla has blazed an important trail for electric cars and is on track to be a leader in autonomous vehicles. Its leadership role is attractive to the Saudi fund, and they could leverage this to take a bigger stake in the broader market for the next generation of vehicles.”
Musk also confirmed that the Saudi fund has acquired a 5 percent stake in Tesla, which is currently worth between $2 billion and $3 billion. Tesla shares rose 0.3 percent Monday to close at $356.41.
Tesla’s board of directors will reportedly meet this week with financial advisers to discuss the plan to take the company private. The directors last week said they had spoken with Musk about the proposal, but they haven’t issued any public statements since. It is believed the
board will ask Musk — who owns about 20 percent of Tesla’s outstanding shares — to recuse himself from talks between the board and any outside financiers that could be brought in to fund the deal.
In his Monday blog post, Musk said he is continuing to have talks with the Saudi fund officials, and other potential investors, because “I would like for Tesla to continue to have a broad investor base.”
Musk said full details of any buyout plan would be provided before Tesla shareholders are asked to vote on the proposal, and estimated that “approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.”
Despite Musk’s confidence, some industry analysts were still scratching their heads about his plans, and how he has disclosed information about his desire to take Tesla private.
“Why not go public with the details from the beginning?” said Clement Thibault, senior analyst at Investing.com. “Musk wants to take the company private to avoid quarterly distraction, but then also writes that Tesla’s biggest shareholders have been extremely supportive of Tesla over the years, meaning Tesla’s shareholders have been patient and focused on the long term. So why go private?”
But Gene Munster, director at Loup Ventures, said that the detail of Musk’s post has him believing “there is a greater than 50 percent chance Tesla is (taken) private in a year.” Munster added that due to having to get regulatory approvals and the necessity of a shareholder vote on the matter, he estimates it will take a minimum of three to nine months before Tesla could go private.