Amid Lawsuit, SEC Investigation, Musk Says Tesla's Private Funding Will Come From Saudi Arabia
Last week, Tesla CEO Elon Musk announced his intention to take the automaker private. But speculation quickly arose that the claim was just a clever ploy to drive up the company’s share price and burn short sellers, a group Musk seems to have a particular disdain for. This resulted in a shareholder complaint, filed Friday as a securities-fraud class action in federal court in San Francisco, alleging he lied to manipulate shareholder prices.
However, the Securities and Exchange Commission was already investigating the matter at the time of the lawsuit’s filing. While the bulk of the initial investigation involved asking Musk if he was lying, it’s presumably advanced in scope and complexity since then. The lynchpin to the whole issue is whether Tesla actually secured the billions in funding necessary to go private. Even though the CEO said the money is real, he did not specify who would provide it.
That changed on Monday morning, when Musk pointed to oil-rich Saudi Arabia. But it’s not as simple as it sounds.
“On August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share. This was a 20 [percent] premium over the ~$350 then current share price (which already reflected a ~16% increase in the price since just prior to announcing Q2 earnings on August 1st),” Musk wrote on the company’s website.
“My proposal was based on using a structure where any existing shareholder who wished to remain as a shareholder in a private Tesla could do so, with the $420 per share buyout used only for shareholders that preferred that option.”
Afterwards, he said the company began reaching out to Tesla’s largest investors and figured the Arab nation was a lock, as the Saudi Arabian sovereign wealth fund approached him about taking Tesla private on multiple occasions.
“They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil,” Musk explained. “They then held several additional meetings with me over the next year to reiterate this interest and to try to move forward with a going private transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.”
Another meeting took place on July 31st, shortly after the Saudi fund purchased almost 5 percent of Tesla stock through the public markets, to tell Musk its position had not changed. Musk says he’s been in contact with the fund’s managing director as they iron out the details. Apparently the Saudis have to complete an internal review process for obtaining approvals and want more details on what taking Tesla private would mean.
“Another critical point to emphasize is that before anyone is asked to decide on going private, full details of the plan will be provided, including the proposed nature and source of the funding to be used,” Musk continued. “However, it would be premature to do so now. I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors, which is something that I always planned to do since I would like for Tesla to continue to have a broad investor base.”
It’s basically a done deal, except not at all. And he can’t talk about it yet.
Once it’s actually time, Musk said Tesla’s board will thoroughly evaluate the plan before shareholders put it to a vote. However, there’s a chance that it won’t include Saudi Arabia. China’s internet and tech giant, Tencent, also holds about 5 percent of Tesla’s stock and the nation seems obsessed with electric car companies lately. The nation even created a slew of government-backed EV startups in the hopes that allowing them to fight it out will forcibly evolve several into powerful monsters. It’s basically Pokémon, if you swapped the cartoon animals out for burgeoning automakers.
Assuming the deal doesn’t go through in the Middle East, China seems the second most likely candidate to privatize Tesla.
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- Del My father bought GM cars in the 60's, but in 1971 he gave me a used Datsun (as they were called back then), and I'm now in my 70's and am happy to say that GM has been absent from my entire adult life. This article makes me gladder than ever.
- TheEndlessEnigma That's right GM, just keep adding to that list of reasons why I will never buy your products. This, I think, becomes reason number 69, right after OnStar-Cannot-Be-Disabled-And-It-Comes-Standard-Whether-Or-Not-You-Want-It and Screw-You-American-Car-Buyer-We-Only-Make-Trucks-And-SUVs.
- 3SpeedAutomatic Does this not sound and feel like the dawn of ICE automobiles in the early 20th century, but at double or triple speed speed!!There were a bunch of independent car markers by the late 1910’s. By the mid 20’s, we were dropping down to 10 or 15 producers as Henry was slashing the price of the Model T. The Great Depression hit, and we are down to the big three and several independents. For EVs, Tesla bolted out of the gate, the small three are in a mad dash to keep up. Europe was caught flat footed due to the VW scandal. Lucid, Lordstown, & Rivian are scrambling to up production to generate cash. Now the EV leader has taken a page from the Model T and is slashing prices putting the rest of the EV market in a tail spin. Deja vu……
- Michael Eck With those mods, I wonder if it's tuned...
- Mike-NB2 I'm not a Jeep guy, but I really, really like the 1978 Jeep Cherokee 4xe concept.
Maybe I’m looking at this way too obviously: but why would Saudi Arabia want to “diversify away from oil”? Doesn’t it make more sense that they’d want to buy up the biggest competitor to gasoline powered vehicles, and then dismantle all the R&D and lock the tech up in a vault forever? Remember this is a civilization that has outlasted hundreds of western “Empires”.
Trump would go nuts if the Chinese invested in Tesla.