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People close to Saudi investment fund reportedly cast doubt on Elon Musk's claims about negotiations to take Tesla private
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People close to Saudi investment fund reportedly cast doubt on Elon Musk's claims about negotiations to take Tesla private

elon musk

Fred Prouser / Reuters

  • Tesla CEO Elon Musk has teased the idea of taking the electric-car company private and said he had "funding secured" for the ambitious move.
  • On Monday, Musk said in a statement that he interpreted earlier overtures from Saudi Arabia's Public Investment Fund (PIF) about taking Tesla private as evidence that the group was "eager to proceed.
  • But reports from The New York Times, The Wall Street Journal, and the Financial Times indicate the fund may not be ready or able to close on such a deal at this time.

In the last week, Tesla CEO Elon Musk has made a series of bold statements - first surprising stakeholders by announcing a proposal to take the company private, then asserting that he had secured funding for such a deal, and finally claiming that Saudi Arabia's Public Investment Fund (PIF) was on board, and "eager to proceed."

But multiple sources cited by The New York Times, The Wall Street Journal and the Financial Times have cast doubt on Musk's claims, alleging that Saudi Arabia has not taken the necessary steps to close on such a deal.

Three sources familiar with the sovereign wealth fund's workings told The New York Times that the PIF has not prepared a term sheet, nor hired a financial advisor to figure out the logistics of such an ambitious move.

And the fund may not even be able to finance such a large scale move.

Two sources familiar with the PIF's finances told The Wall Street Journal that they doubt any discussions between Musk and the PIF have gotten very far, as the fund is already struggling to finance its existing commitments.

Saudi Arabia's Crown Prince has vowed to turn the PIF into "one of the world's largest sovereign wealth funds," and pledged to raise the PIF's assets from $250 billion to $400 billion by 2020.

The fund has sought to establish its value through a series of high-profile purchases over the past two years. The company invested $3.5 billion in Uber in June 2016, announced in May 2017 that it raised $93 billion for investments in tech, and pledged to invest about $1 billion in Virgin Group's space company, Virgin Galactic, in October.

The PIF appears to be scrambling for funds

saudi money

REUTERS/Faisal Al Nasser

To generate cash for its growling list of deals, Saudi Arabia has mulled several radical strategies.

Earlier this month, Reuters reported that the PIF was preparing to tap global banks to acquire $6 billion to $8 billion to fund a syndicated loan.

And sources told the Financial Times that Saudi Arabia's oil-giant Aramco was instructed by the Royal Court to acquire the PIF's 70% stake in petrochemical maker Sabic in order to raise $70 billion for the fund's mounting investments.

"While there is a business case for Saudi Aramco to buy a controlling stake in Sabic, this is not the primary driver of the deal," Phillip Cornell, a senior fellow with the Atlantic Council's Global Energy Center, told Financial Times.

"It was requested from higher up in order to put liquidity into the PIF."

The PIF has been quiet about the sources of its funding, and has yet to issue an official statement about a deal with Tesla deal. The company has already a bought nearly $2 billion worth of Tesla shares, building up a stake just short of 5% in the company.

Musk is confident that the PIF can afford the deal

Elon Musk

Marcio Jose Sanchez/Associated Press

In his blog post on Tesla's website Monday, Musk said the PIF approached him "multiple times" about Tesla's plans to take the company private. Musk claims he first met with the PIF in the beginning of 2017 as well as "several" times during the year.

"Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction," Musk wrote.

The Tesla CEO claims the fund's managing director met with him again on July 31 and "strongly expressed his support for funding a going private transaction for Tesla at this time." The meeting struck confidence in Musk, prompting him to tweet that funding had been secured, he said.

Musk wrote that he left the meeting with "no question" of the PIF's ability to close the deal, and it was "just a matter of getting the process moving."

Musk says he continues to communicate with the PIF's managing director:

"He has expressed support for proceeding subject to financial and other due diligence and their internal review process for obtaining approvals. He has also asked for additional details on how the company would be taken private, including any required percentages and any regulatory requirements."

Still, Musk said that before going private, full details of the plan "including the proposed nature and source of the funding to be used" will be released. He added that he is still in talks with "a number of other investors."

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