Elon Musk reveals more details about potential Tesla buyout deal

14 Aug 2018

Tesla store in Walnut Creek, California. Image: Sheila Fitzgerald/Shutterstock

Tesla CEO Elon Musk says Saudi Arabia is the main source of funding under his buyout plan, but will it all come together?

Barely a week has passed since Tesla and SpaceX CEO Elon Musk announced plans on Twitter to potentially take his automotive business private.

The unorthodox announcement caused confusion and even sparked an SEC investigation, but Musk has provided more concrete information about how the buyout would go, as well as the source of the mysterious funding.

On 13 August, Musk wrote that the Public Investment Fund (PIF) of Saudi Arabia offered to fund taking Tesla private during a meeting on 31 July. He said: “I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving.”

This, Musk explained, is why he had tweeted the words “funding secured”. These two words had originally sparked confusion and concern due to their vague nature. Initially, Tesla stock shot up 11pc when Musk announced he would be taking the company private at $420 per share.

What is the Saudi Arabia PIF?

The PIF of Saudi Arabia manages more than $230bn in assets. 65pc of that is large stakes in Saudi firms, while the rest is in overseas deals, including one with the SoftBank Vision Fund. Crown Prince Mohammed bin Salman leads the board.

On 10 August, lawsuits against Musk and Tesla were filed. One plaintiff, Kalman Isaacs, said that Musk’s tweets and Tesla’s failure to amend them amount to a “nuclear attack” on short-sellers.

Musk addresses concerns of Tesla shareholders

Musk addressed allegations of stock manipulation and securities fraud in the blogpost. “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.

“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. As a result, it was clear to me that the right thing to do was announce my intentions publicly.”

Not a done deal

Musk concluded by saying it would be “premature” to present a full proposal for the buyout plan. He added that he is looking to include others to broaden the investor base.

If this plan continues to unfold, the proposal will be presented to an independent board committee. The committee must approve the plans for the buyout to become reality. Shareholder and regulatory approvals are also crucial.

Tesla store in Walnut Creek, California. Image: Sheila Fitzgerald/Shutterstock

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects