By on August 13, 2018

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.

[Image: Tesla]

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27 Comments on “Amid Lawsuit, SEC Investigation, Musk Says Tesla’s Private Funding Will Come From Saudi Arabia...”


  • avatar
    EBFlex

    This guy is such a fraud.

  • avatar
    scottbronikowski

    Reuters has reported that Saudi Arabia is not interested…
    https://www.reuters.com/article/us-tesla-musk-saudi-exclusive/exclusive-saudi-arabias-pif-has-shown-no-interest-in-bankrolling-tesla-buyout-sources-idUSKBN1KW0FA

  • avatar
    slavuta

    Saudis attacked America. ’nuff said.

    • 0 avatar
      raph

      Edgy! Although its not like the terrorist didn’t attack without provocation. We’ve only been best buddies with and propped up the House of Saud for almost the last 75 years.

      If anything 9/11 should be a cautionary tale about the law of unintended consequences and how trying to stabilize a region and contain another world super power can blow up (no pun intended) in your face.

  • avatar
    cicero1

    this was an untrue statement of materiel fact under 10b-5. Musk will be lucky to get off with just a big fine.

  • avatar
    I_like_stuff

    Do American tax payers get back our $5B that Musk has embezzled?

    • 0 avatar
      raph

      You owe your peasant existence to the “job creators” and as such shouldn’t have any issue handing over tribute to them. Your standard of living, the envy of the world, is only through their largesse!

      Don’t be so ungrateful!

  • avatar
    Master Baiter

    It seems every week or so Musk makes a rookie mistake that a middle manager in Fortune 500 company couldn’t get away with.

  • avatar
    DeadWeight

    Musk just tweeted that Tesla just secured financing from Ethiopian Sovereign Wealth Fund to take Tesla private in management-led LBO at equivalent of $42,000 per share.

    • 0 avatar
      stingray65

      I heard Ethiopia was in a bidding war with the Venezuelan Sovereign Wealth Fund – latest bid is now $57,000 per share, and rumor has it that North Korea may jump in with a bid of $60,000 per share equivalent in nearly new Nuclear warheads.

    • 0 avatar
      raph

      Dude seriously needs to tap that Nigerian sovereign wealth fund! I hear he can get 100 billion by wiring the prince in charge of the fund with some personal cash so that the money can be freed up!

  • avatar
    Lockstops

    I was sure Musk was going to say that the funding will come from Nigeria.

    • 0 avatar
      stingray65

      Must be the Nigerian prince that keeps calling me about needing me to wire him some money to get his personal fortune released, which he will then share with me 50/50. Guess Elon decided to take him up on the offer.

  • avatar
    indi500fan

    Can’t wait to see the pics of Elon & JB in keffiyahs.

  • avatar
    stingray65

    The statement was made just to kill those shorting Tesla stock, and Elon should have the book thrown at him, but since his company is saving the world from climate change he will probably get off with a warning in any California court.

  • avatar
    SCE to AUX

    Twitter – not nukes – will bring about the end of the civilized world.

  • avatar
    MoDo

    There isn’t and never was any funding – he clearly thought the stock bump would outweigh the fines. I assume?

  • avatar
    Reino

    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”.

    • 0 avatar
      cdotson

      Saudi Arabia is a civilization in quite a state of flux at this point in history. Recent kings have all been brothers/half-brothers and it appears this has bred a bit of hostility between the recent kings’ first-born sons, one of whom recently died in a helicopter “accident.” The present crown prince was in Las Vegas on October 1, 2017 and very near the festival shooting.

      Elon Musk has met with the current SA crown prince. There could be a strategic position beyond dismantling competing tech. Once the technological genie is out of the bottle it’s mighty hard to put it back in.

      The prince has been on an “anti-corruption” crusade within his country and has arrested other royalty. Apparently even desert countries have swamps that need draining. The present crown prince has stated he is a reformer/modernizer who is seeking to dismantle the country’s dependence on redistributed oil wealth and emerge into a modern diversified economy. Hedging the sovereign wealth via ownership in a company poised to excel should troubles befall oil production seems in line with this reformist angle.

      • 0 avatar

        I think your statements are overly generous to the current prince. SA has hired several PR firms worldwide to better shape its image for Westerners – as the UAE has successfully done.

        Many of those people being arrested are, in fact, human rights activists not wealthy corrupt princes.

  • avatar
    Reino

    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”.

  • avatar

    Trump would go nuts if the Chinese invested in Tesla.

    • 0 avatar

      Nah, I expect he sees lots of similarities with Elon. Plus, Elon has recently become a supporter of the Republicans (including sizeable donations) – so, I expect he would look the other way.

      Just like how he promised to help Huawei get back into the US market if they would allow his daughter’s fashion line to win trademarks in China.

      • 0 avatar
        Art Vandelay

        Source?

        • 0 avatar

          My mistake, it was ZTE not Huawei:
          https://www.nytimes.com/2018/05/28/business/ivanka-trump-china-trademarks.html
          https://www.thestar.com/business/2018/05/28/ivanka-trumps-trademark-victory-in-china-coincides-with-dads-pledge-to-save-zte.html

          And Elon + Repubs = <3 :
          https://www.businessinsider.com/elon-musk-political-donations-2018-7
          http://fortune.com/2018/07/15/elon-musk-donations-republicans-controversy/

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