Saudi’s PIF in Talks to Invest in Tesla Rival, Lucid
$TSLA, $SFTBY, $ORCL
PIF, the Saudi Arabian sovereign wealth fund is in late stage talks to invest in Tesla rival Lucid Motors Inc.
The talks between privately-held Lucid Motors and PIF underscore the Saudi’s appetite to invest in EV makers to diversify the Crude Oil-rich Kingdom’s investment portfolio.
A deal with Lucid Motors would also be more in line with PIF’s resources. PIF has already made substantial commitments to other technology companies or investments, including a $45-B agreement to invest in a giant technology fund led by Japan’s SoftBank Group Corp (OTCMKT:SFTBY).
PIF and Lucid Motors have drawn up a term sheet under which PIF could invest more than $1-B in Lucid Motors and obtain majority ownership.
PIF’s 1st investment in Lucid Motors would be for $500-M, and subsequent cash injections would come in 2 stages that are contingent on Lucid Motors hitting certain production milestones.
The talks between PIF and Lucid Motors may not result in a deal.
PIF and Lucid Motors did not immediately respond to requests for comment.
Mr. Musk stunned financial markets on 7 August, when he revealed on Twitter he was considering a 420/share take-private deal for Tesla.
He added that funding for the ‘420’ deal was “secured,” and elaborated last Monday that he believed Saudi Arabia’s PIF could provide the necessary funding.
Earlier this year, PIF built a stake of just under 5% in Tesla by buying shares in the open market.
Mr. Musk has also said he believes 67% of existing Tesla shareholders would roll over their holdings into a private company, rather than cash out, and that he is still talking with major shareholders and advisers before settling on a structure for a deal.
Getting access to cheap capital is a constant challenge for automakers, which can spend $1-B or more engineering a new model and bringing it to mass production, only to have the vehicle flop because the market shuns it.
Based in Newark, California, Lucid Motors was founded in Y 2007 as Atieva by Bernard Tse, a former Tesla Vp and board member, and Sam Weng, a former exec at Oracle Corp (NASDAQ:ORCL) and Redback Networks. It received backing from Chinese investors, including tech entrepreneur Jia Yueting and state-owned automaker BAIC.
Other venture capital backers have included Venrock, Mitsui & Co and Tsing Capital.
Lucid Motors is not selling cars yet.
In Y 2016, it unveiled a prototype of its Lucid Air model, a $100,000 luxury sedan it had hoped to begin building in Arizona in late Y 2018. The company is accepting refundable place holder deposits of $2,500 from consumers on its website.
Tesla sems to be a more advanced EV manufacturer, though investors are questioning how long can it go before turning a profit. It has been burning through cash as it has aggressively ramped up M3 production, a process Mr. Musk has called “production Hell.”
We have questioned the profitability of the M3 and believe that Tesla could lose at least $6,000 on every M3 car.
HeffX-LTN’s Overall Technical Outlook for TSLA is Bearish