Saudi Arabia's PIF has no plans to back Tesla buyout - report

To invest in Elon Musk's $72bn plan, the fund would need the guidance of Softbank, who invested in rival GM Cruise earlier this year
Saudi Arabia's PIF has no plans to back Tesla buyout - report
Tesla is facing competition from automakers such as Mercedes, BMW and Audi as they embark on strengthening their electric vehicle offerings. Image: Getty Images
By Staff writer
Sun 12 Aug 2018 03:47 PM

Despite acquiring a minority stake of around 5% in electric car maker Tesla this year, Saudi Arabia’s Public Investment Fund (PIF) has no interest in funding CEO Elon Musk’s proposed $72 billion plan to take the firm private, two sources familiar with the matter told Reuters.

Musk said on Tuesday via Twitter that he is considering taking Tesla private, adding that funding has been secured.

While the 47-year old investor and engineer did not provide details of investors, analysists suggested the government-backed PIF would be a natural partner following its stake acquisition and its history in funding technology projects, including a $45 billion investment in SoftBank Group Corp’s Vision Fund over five years.

The sources said the fund would not make such an investment without the guidance of Softbank, who invested in Tesla rival US firm GM Cruise earlier this year.

Tesla’s board is yet to receive a detailed financing plan from Musk, after which it will decide on whether or not to hire advisers and launch a formal review of the proposal, according to the sources, who requested anonymity due to the confidentiality of the plan.

PIF was not immediately available for comment, while Tesla refused to comment.

Tesla is facing competition from automakers such as Mercedes, BMW and Audi as they embark on strengthening their electric vehicle offerings.

Taking the company private after eight years as a public firm would lessen the pressure that comes with sharing quarterly earnings, particularly at a time when Tesla faces production issues and negative cash flow.

Musk suggested on Twitter that shareholders will have a choice of selling their shares for $420 each or maintaining their investor status in a private Tesla.

He added that he will look to keep his ownership of Tesla at around 20% in a buyout deal.

Given that Tesla is not turning a profit, analysts have told Reuters it would be difficult for Musk to raise the equity and debt financing needed for the deal, with some suggesting he could convince top shareholders including Fidelity Investments and China’s Tencent to roll their equity stakes into the deal.

The legal challenges, however, would lie in buying out smaller shareholders, they said.

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