Musk said the Saudi investment Fund has approached Him several times over the past two years with proposals to help the struggling company become private
Tesla founder Elon Musk has announced that Saudi Arabia’s sovereign wealth fund has approached the electric car company with an offer to help take it private.
In a blogpost published on Monday Musk wrote that the Saudi investment fund – which owns 5% of Tesla – had approached him several times over the last two years with offers to help the struggling company go private. The last discussion appears to have taken place on 31 July when the fund’s managing director “expressed regret that I had not moved forward previously on a going private transaction with them, and he strongly expressed his support for funding a going private transaction for Tesla at this time”, wrote Musk.
The statement comes after Musk shocked investors by announcing via Twitter that he was considering ending Tesla’s stock market listing and taking the company private. That tweet led to a brief suspension of trading in Tesla’s shares and is now the subject of an investigation by the Securities and Exchange Commission, according to the Wall Street Journal, and legal action by investors.
Last Tuesday Musk said he planned to take Tesla private at $420 a share, a 20% premium to the share price that day and valuing the company at about $72bn. Musk said that that funding was secured but gave no further details.
The company has had only two profitable quarters since in went public eight years ago and lost about $2bn last year. While it has recently hit production targets for its lower-cost Model 3 vehicle, analysts have worried that the company is still spending too much and will run out of cash. Tesla currently has about $2.2bn in cash on hand.
Musk used the blogpost to try to explain some of the thinking behind last week’s tweet. After meeting with Tesla’s board, Musk said it was agreed that he would reach out to some of the company’s largest shareholders about the idea.
“The only way I could have meaningful discussions with our largest shareholders was to be completely forthcoming with them about my desire to take the company private,” Musk wrote. “However, it wouldn’t be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time.”
The entrepreneur who made his first fortune as one of the founders of PayPal, the online payment system, has had a rocky relationship with investors in recent months.
In May he told analysts: “Boring, boneheaded questions are not cool.” The combative analysts’ conference led to a sharp sell-off for Tesla. He has also taken on short sellers – investors betting on a collapse of Tesla’s share price.
Outside of Tesla Musk has also attracted criticism after attacking British diver Vern Unsworth after he criticized Musk’s offer to provide a mini-submarine to help rescue the boys trapped in a Thai cave, a suggestion Unsworth called a “PR stunt”.
Those comments too hit Tesla’s share price as investors questioned Musk’s soundness to run a public company.
Taking the company private would allow Tesla to develop its products away from the quarterly scrutiny imposed on a public company.
In a letter to staff last week Musk made the case for going private, arguing that Tesla was “the most shorted stock in the history of the stock market”. He wrote that “being public means that there are large numbers of people who have the incentive to attack the company”.
A larger investment in Tesla would be the latest move by Saudi Arabia’s Public Investment Fund (PIF) to diversify its assets away from oil. The fund has $2tn under management and is widening its investment strategy as part of Saudi Arabia’s Vision 2030 initiative to make the country less reliant on oil revenues.