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Saudi Arabia could plan a wholesale bid for Tesla's leveraged buyout



The Tesla Showroom in Santa Monica, California
Photo: Richard Vogel (AP)

Saudi Arabia's official sovereign wealth fund may consider investing heavily in Elon Musk's electric car giants Tesla sources report it "In talks" after Musk slipped on Twitter that he was considering keeping the company private in a $ 60 billion deal at $ 420 a share, Bloomberg reported on Sunday.

According to the report, the Public Investment Fund (PIF) of Saudi Arabia has already built a 5 percent stake in the company and is trying to dramatically increase that share. Bloomberg wrote that the investment will be part of the country's prosperity plans to go beyond the oil market, which has been shaken in recent months and threatened in the long run by countries seeking to switch to renewable energy:

The Public Investment The fund, which has built just under 5 percent of Tesla over the past few months, is exploring how it can be included in the potential deal, people asked to be unidentified, said the matter , The discussions started before the controversial tweet of August 7 by Musk, who is Tesla's co-founder and chief executive officer, and said he was considering a plan to privatize the company.

The PIF sees its investment in Tesla as a strategic path for the world's largest crude oil producer to hedge against oil, people said. The Saudi fund has made no firm decisions on whether to increase its stake or how much, but the talks continue, they said. It was not immediately clear how much the fund would invest in Tesla.

… The PIF and Tesla did not respond to requests for comments.

Just a day before, Reuters reported that PIF managers had no interest in a larger share of Tesla. The report said that the reluctance was partly due to support from the alleged Tesla buyout partner Softbank, in which the PIF had invested $ 45 billion, and partly because the PIF was already Tesla's rival GM Cruise had bought. Take the news from Bloomberg with a grain of salt.

Reuters wrote:

… One source familiar with PIF's strategy said it was not currently involved in a financing process for Tesla's take-private deal.

A second source close to the situation also said that PIF was not participating in such a plan at that time. This source said the Saudi Arabian fund would not make such an investment without first consulting the Softbank.

Reuters reported Wednesday that SoftBank has not signed a contract with Tesla as the investment was made earlier this year in competitor GM Cruise.

Musk said in his first announcement – which was initially considered a joke because 420 was the so-called "weed number" – that funding for the deal was already secured. This can not be readily verified due to the inherent secrecy in the bidding process, but it is possible that Musk has only secured part of the funding, one of its partners has resigned, or is trying to refine the bidding process to get better [19659006] The Securities and Exchange Commission has reportedly initiated an investigation into the Musk tweet, purportedly to determine whether it is misleading, false and / or an attempt to manipulate stock prices. There is also rampant speculation that Musk, who is not exactly known for his prudent judgment on what to tweet or not, bluffed and all Tesla's announcements since attempting to extricate themselves from a dire situation brought the company into play However, Saudi Arabia has been trying to raise the PIF to $ 2 trillion by 2020, which could help secure its wealth (and possibly help consolidate its notoriously repressive monarchy), itself If the oil market is no longer lucrative enough the country's economy in the future. Above all, it has tried to expand its tech investments; It has shown its interest in robotics and Crown Prince Mohammed bin Salman is making plans to build Neom, an alleged 10,230 square kilometer megacity and technology center that would cost $ 500 billion. Earlier this year, the Crown Prince is said to have wavered to Silicon Valley, and the kingdom was probably behind a fierce propaganda magazine that hit the New York Tribune in the US in March.

Musk's proposed leveraged buyout could be the largest in history, pulling off even the CEO's 20 percent stake. In an e-mail posted on the Tesla website, Musk said Tesla was under "tremendous pressure" to achieve short-term revenue targets, suggesting that the firm's external investment could give it room to breathe and protect it from rivals: [19659005] Also, publicly exposing us to the quarterly earnings cycle, Tesla is under tremendous pressure to make decisions that may be appropriate for a particular quarter but are not necessarily accurate in the long run. After all, being the shortest traded stock in the history of the stock market means to be publicly aware that there are a large number of people who have an incentive to attack the company.

Musk also claimed that the buyout was no excuse for him to have more direct control over the company by writing that his 20 percent stake "is not significantly different after closing a deal."

If Musk keeps the company private, there are a limited number of investors who are able to provide the necessary funding. Per Wired has investors in Saudi Arabia, China and Japan, with China likely to lead the way, with 10 percent of all car sales being battery-powered vehicles next year.

[Bloomberg]


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