Saudi’s PIF Has No Interest in Banking Elon Musk in Tesla (NASDAQ:TSLA) Buyout
- PIF’s reluctance will add to the pressure on CEO Musk to produce details of his financing plan.
Saudi Arabia’s Public Investment Fund (PIF) has shown no interest so far in financing Tesla Inc (NASDAQ:TSLA) CEO Elon Musk’s proposed ‘420’ $72-B deal to take the US EV maker private, despite acquiring a minority stake in the company this year, according to sources.
Tesla CEO, Elon Musk, 47 anni, stunned financial markets last Tuesday when Tweeted that he was considering a take-private deal for Tesla. Mr. Musk also said he had secured funding for the proposal, he provided no details.
Investors and analysts had viewed PIF as a natural financing partner.
PIF has taken a stake below 5% in Tesla, the sovereign wealth fund has invested tens of billions of dollars into technology investments, including $45-B in SoftBank Group Corp’s (9984) Vision Fund over the last 5 years.
However, a source who is familiar with PIF’s strategy said it was not currently getting involved in any funding process for Tesla’s take-private deal.
A second source close to the situation also said PIF was not taking part in any such plan at this stage. This source said that the Saudi fund would not make an investment of this kind without seeking guidance first from Softbank.
Reuters reported on Wednesday that SoftBank was not currently pursuing a deal for Tesla given its investment earlier this year in rival GM Cruise.
PIF’s reluctance will add to the pressure on Musk to produce details of his financing plan.
Tesla’s board has not received a detailed financing plan from Chairma/CEO Musk, and is seeking more information, Reuters reported last Thursday.
Investment bankers and Wall Street automotive sector analysts have so far reacted with skepticism saying it would be hard for Mr. Musk, whose net worth is pegged by Forbes at $22-B, to raise the equity and debt financing needed for the deal given Tesla is not turning a profit.
Some analysts have suggested that Mr. Musk may be able to convince Tesla’s top shareholders, such as Fidelity Investments and China’s Tencent, to roll their equity stakes into the deal, thereby significantly reducing the amount of money needed to be raised.
However, the deal structure would come with big logistical and legal challenges when it comes to buying out smaller shareholders, analysts say. And do not expect the risky deal to happen.
Elon Musk and his company are currently under investigation by the US Securities and Exchange Commission and being sued by at least 2 shareholders looking to convert suits to a class actions for securities fraud.
Tesla did not respond to a request for comment on the proposed class-action complaints filed in the federal court in San Francisco.
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