Giant Saudi fund emerges as backer of bid for Elon Musk's Tesla

13 August, 2018, 16:55 | Author: Regina Silva
  • Tesla has been targeted by short-sellers- the hedge fund managers Jim Chanos and David Einhorn in particular- who are betting on the company's failure

In one of the lawsuits, the plaintiff Kalman Isaacs said Musk's tweets were false and misleading, and together with Tesla's failure to correct them amounted to a "nuclear attack" created to "completely decimate" short-sellers.

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.

According to a Bloomberg report, published Sunday, part of the financing for taking Tesla private might come from Saudi Arabia's Public Investment Fund (PIF).

In a blog post, Mr Musk said that he only wanted to buy out shareholders who no longer wanted to own Tesla shares.

The lawsuits were filed three days after Musk stunned investors by announcing on Twitter that he might take Tesla private in a record $72 billion transaction that valued the company at $420 per share, and that "funding" had been "secured".

In laying out why he is considering taking Tesla private, Musk pointed in part to shorts.

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Musk is interested in having a wide pool of investors rather than few stakeholders.

The Public Investment Fund didn't respond to requests for comment, and Tesla declined to comment. The US Securities and Exchange Commission is examining whether the tweet was meant to be factual, according to a person familiar with the matter, and at least two investors have sued Musk and Tesla alleging share-price manipulation.

It is understood Saudi Arabia views an investment in Tesla as a strategic hedge against the oil price. Saudi's sovereign fund - Public Investment Fund - had built almost five percent stake before Musk's tweet.

SoftBank's decision to back away from any potential Tesla take-private is noteworthy given its self-styled reputation as the investor du jour for any technology or tech-enabled asset that comes to market. In a tweet on Sunday, the nation's Energy Department said Saudi Arabia now is working to develop a city to support the supply of raw materials and parts for the automobile industry.

The question of privatisation is still carrying on in financial circles, but for those outside the Wall Street bubble the episode is a timely reminder: When you're as big as Musk, Twitter can be an expensive habit.

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