Elon Musk says Saudi fund on board to take Tesla private

Muriel Colon
August 13, 2018

Tesla Inc. (TSLA) and its outspoken Chief Executive Officer Elon Musk were slapped with two class-action lawsuits over Musk's series of tweets last week in which he announced a plan to take the company private.

Saudi Arabia is exploring how it could bankroll Elon Musk's ambitious plan to take Tesla private, as burnt short-sellers sue the electric vehicle entrepreneur over his bombshell tweet last week. Musk said he had a July 31 meeting with representatives of the Saudi Arabia sovereign fund and left it "with no question" that a deal could be closed.

Musk in his blog elucidated his reasons of making a public announcement.

Investors who prefer not to stick with a private company would be paid $420 per share, said Musk, who added that he expects a third of shareholders to sell. The comprehensive plan, known as Vision 2030, was laid out in April by the country's leaders and involves transferring 5 percent of state-owned Saudi Aramco to the investment fund through an initial public offering, expected to be the largest in history.

Musk's assertion about the support of Saudi Arabia's Public Investment Fund contradicts a report from Reuters. The timeline begins on August 2, when Musk told the board that he wanted to take Tesla private.

Reuters reported on August 11 that the PIF has shown no interest so far in financing Musk's proposed deal, while CNBC said on August 9 that Musk previously talked with the Saudi fund about a take-private deal, citing one person familiar with the matter.

Taking Tesla private would remove the pressure from Musk coming from hedge funds betting that the company's stock will drop given its production issues and negative cash flow. It is appropriate to complete those discussions before presenting a detailed proposal to an independent board committee. Tesla's shares briefly turned negative on the news and traded up 0.8 percent at 4:05 p.m.in NY.

Moody's Investor Services on Friday had said Musk's consideration to take Tesla private was credit negative, noting the company's negative cash flow in the second quarter and maturities of $1.2 billion in convertible debt through March 2019.

Therefore, reports that more than $70B would be needed to take Tesla private dramatically overstate the actual capital raise needed. "So the potential investor must be patient and strategic-looking". If shareholders approved a deal, it would remove Tesla from Wall Street scrutiny, eliminating the need to publicly disclose its earnings and - for Musk - having to explain himself to shareholders.

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