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Businesses Transportation

Saudi Fund in Talks to Invest in Tesla Buyout Deal, Report Says (bloomberg.com) 216

Posted by msmash from the closer-look dept.
Saudi Arabia's sovereign wealth fund is in talks that could see it becoming a significant investor in Tesla as part of Elon Musk's plan to take the electric car maker private, Bloomberg reported Sunday, citing a person with direct knowledge of the fund's plans. From the report: The Public Investment Fund, which has built up a stake just shy of 5 percent in Tesla in recent months, is exploring how it can be involved in the potential deal, the person said on condition of anonymity. Discussions began before the controversial Aug. 7 tweet by Musk, who is Tesla's co-founder and chief executive officer, saying he was weighing a plan to take the company private. The PIF sees its investment in Tesla as a strategic way for the world's biggest crude producer to hedge against oil, the person said. The Saudi fund hasn't made any firm decisions on whether to increase its stake, or by how much, but talks are ongoing, the person said. It wasn't immediately clear how much the fund would invest in Tesla.
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Saudi Fund in Talks to Invest in Tesla Buyout Deal, Report Says More

Saudi Fund in Talks to Invest in Tesla Buyout Deal, Report Says

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  • Musk did have something concrete ? Shocking!

    • Only the most optimistic Tesla supporter would equate an investor "exploring how it can be involved in a potential deal" with "something concrete".

      • Re:shocking ! (Score:5, Interesting)

        by Rei ( 128717 ) on Sunday August 12, 2018 @09:25AM (#57111212) Homepage

        Apparently some people have trouble understanding the difference between "having secured funding sources" and "having negotiated a deal that's ready to present to shareholders for a vote".

        A year ago, Tesla had secured funding for a buyout deal from Softbank. But the deal negotiations fell apart over the level of control (Musk didn't want Softbank basically having veto authority over all company decisions).

        Several years ago, Tesla had secured funding for a buyout deal from Google. But during the negotiations, Tesla's financial fortunes turned around and Musk broke off the negotiations.

        There's no shortage of people out there who would consider a 20% premium not unreasonable for gaining significant control of the company (and of course its corresponding value surge when its shorts are forced to all cover at once). I estimate the total cost of the buyout to be on the order of $20-25B, maybe as much as $30B, depending on the details (a big question is who can remain on as investors). Musk obviously won't be selling his stake, and most (but not all) institutional investors seem to think that $420 is below their sell price. We're polling retail investors right now on TMC and it looks like most think $420 isn't even close to their selling point. But there's a number of regulations that may make it difficult for some parties to remain on if Tesla goes private.

        With a buyout on the order of a few tens of billions of dollars, and a desire that no single party come close to a majority stake, individual investments can be expected to be on the order of a few billion dollars each. There's a great number of companies / individuals / funds out there for which this is a reasonable investment range. And the Saudi sovereign wealth fund is definitely among them. I am not privilege to the Saudis' investment structure, but the Norwegian sovereign wealth fund has a ton of investments over $1B (but only one over $8B).

        • Re: (Score:2, Informative)

          by JoeyRox ( 2711699 )
          Apparently some people have trouble understanding the difference between "having secured funding sources" and "having negotiated a deal that's ready to present to shareholders for a vote".

          And yet Musk has achieved neither so I'm not sure the difference you're highlighting is relevant. "Secured" in the financial world means a firm commitment. An investor "exploring how it can be involved" is nowhere near that threshold.

          • Re: (Score:3, Informative)

            by Rei ( 128717 )

            Interesting theory. I can totally imagine buying a home under your definition:

            Seller: "Have you secured funding for buying the house?"
            Buyer: "Yes, I have a loan offer from my bank"
            Seller: "Unfortunately that won't do. You see, I don't consider it 'secured' until you've accepted the bank's loan offer and have the cash on hand. Goodbye!"

            • Re:shocking ! (Score:4, Informative)

              by JoeyRox ( 2711699 ) on Sunday August 12, 2018 @10:02AM (#57111380)
              A loan offer from a bank is in fact considered "secured funding" since it represents a firm commitment by the bank. I didn't say a firm commitment means an executed commitment, ie funds delivered, so you're 0 for 2 on the relevance scale for posts.

              • Re: (Score:2)

                by Rei ( 128717 )

                Wow, having an offer from a reliable funding entity is "secured funding", even if you haven't yet agreed to their preferred terms, and even if you ultimately arrange for other terms with them or with other parties. Imagine that.

                I'm glad we were able to have this discussion today.

                • Re:shocking ! (Score:4, Interesting)

                  by JoeyRox ( 2711699 ) on Sunday August 12, 2018 @10:22AM (#57111492)
                  Yes, you've finally gotten it right - an offer for funding is in fact considered "secured funding" in the financial world. It's the same thing when someone offers shares for sale on a stock exchange - the potential buyer hasn't contractually agreed to the seller's terms until he executes the transaction.

            • Re:shocking ! (Score:4, Informative)

              by LynnwoodRooster ( 966895 ) on Sunday August 12, 2018 @10:42AM (#57111580) Journal
              The seller has nothing to do with the terms of your loan. When you have a secured loan from a bank for purchase of a house, the bank has already decided to give you the money it agreed - $500K, $250K, whatever. The ONLY terms the bank will typically place on the loan is that the house has to be worth the amount loaned, based on an independent inspection. But the money is the buyers money to use, and the seller doesn't matter at all. Terms are decided (rates, payment periods, etc) all done. Just the final validation (like an audit) to ensure the property is worth the funds.

              • But the money is the buyers money to use

                Is it? IANAREL but I'd have thought that if the bank lent you money to buy a specific house it'd be a little impolite to go to Vegas with it, buy TSLA, short TSLA, buy a different house or indeed do anything other than use it to buy that specific house.

            • The buyer has a secured offer in that, with exceptions for the collatoral value of the house, they can totally sue the bank to enforce the loan offer. That's what "secured" means. The fact that the buyer hasn't yet accepted it doesn't change anything.

              Musk is going to need to produce an appropriately signed and dated piece of paper.

            • seriously are you that dense? a Loan Offer is a firm commitment

              . a discussion with your bank saying," hey next week I might be interesting in taking out a loan for a house can I talk to you about that if I decide too?" and them "saying sure come talk" that is not a firm commitment, which on the face of it is what people are suggesting Musk has, if it is the former he is fine, if it is the later he is FUCKED!

          • Re:shocking ! (Score:5, Insightful)

            by Rei ( 128717 ) on Sunday August 12, 2018 @09:59AM (#57111354) Homepage

            You know, maybe if Musk had wanted to make clear that he hadn't accepted any terms yet, he shouldn't have made any definitive statements, but rather have started off his post with something like "Am considering taking Tesla private...", and continually used words like "if we go private" multiple times, "would be", "in any scenario", etc, and only talked about "investor support".

            '... oh wait.

            • While I mildly disagree with you on some things, I still think you are a mostly reasonable person. Watching you suffer these fools is painful for me. I am unsure if they have some sort of actual mental disorder or if it is willful ignorance. It is like they are fully invested in not understanding/seeing reality. It is happening everywhere. Did someone add something to the water?

              Anyways, have a nice day. :)

          • You're claiming that if Musk had worked something out, you'd be sure to know about it?? Shut it, clown.

        • Tesla had secured funding for a buyout deal from Softbank. But the deal negotiations fell apart over the level of control

          You obviously use a different meaning of "secured" to me. Well, to everyone, actually.

          I secured the sale of my house, but later the buyer didn't sign the contract!

      • Re: (Score:2)

        by haruchai ( 17472 )

        Only the most optimistic Tesla supporter would equate an investor "exploring how it can be involved in a potential deal" with "something concrete".

        More info has now been released by Tesla and it looks like this has been in the works for some time

        https://electrek.co/2018/08/13... [electrek.co]

        As I announced last Tuesday, I’m considering taking Tesla private because I believe it could be good for our shareholders, enable Tesla to operate at its best, and advance our mission of accelerating the transition to sustainable energy. As I continue to consider this, I want to answer some of the questions that have been asked since last Tuesday.

        What has happened so far

    • No, he didn't. They said talks were ongoing and there was no firm decision, which means funding was NOT secured and not at $420, per Musk's tweet, at least with the Saudi PIF.

      • Re:shocking ! (Score:5, Interesting)

        by Rei ( 128717 ) on Sunday August 12, 2018 @09:34AM (#57111252) Homepage

        Do the Saudis have the money? Answer: Yes.
        Does there exist a set of terms under which the Saudis would be willing to provide the money? Answer: Apparently yes.
        Are terms agreed upon? Answer: No.
        Are the Saudis the only player involved? Answer: No.

        Summary: Is funding secured? Yes. Is a deal complete and ready to present to shareholders? No.

        Apparently you were wishing that Elon had tweeted "Buyout deal for Tesla complete; all terms negotiated and ready to be voted on at next shareholder meeting".

        • So it's at $420, the Saudis have already agreed to the price and terms? Really? Is that why they are still negotiating?

          Secured funding is binary - it either is or isn't. If it is, then terms, players, and amounts are all done. If it isn't, then negotiations are still going on. You're trying to debate that you can be a little pregnant - not gonna work.

          • Re: (Score:2)

            by Rei ( 128717 )

            Control, structure, parties to the deal, and a million other things.

            • So - deal not secured. If you're still talking those terms, there isn't secured funding. Saudis have NOT agreed to give $420 per share if they're still negotiating all those terms. Again - it's binary. It's either secured or its not.

        • Re: (Score:2)

          by haruchai ( 17472 )

          Musk specifically stated "Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote"
          https://twitter.com/elonmusk/s... [twitter.com]

          Based on that, the initial market reaction and the numerous tweets and videos in support to taknig Tesla private, a vote could be held Monday and the wheels set in motion.

          Because as he said "funding secured", right?

        • Re: (Score:2)

          by jezwel ( 2451108 )

          Summary: Is funding secured? Yes.

          You entire post was fine except you put 'Yes' to this instead of 'No'. If there is still negotiation about terms, funding is not secured - either side can walk away at anytime.

        • Add "Are the Saudis abusive scumbag? Yes"

    • Musk did have something concrete ? Shocking!

      Yeah, I stopped believing anything Musk says anymore, ever since he came up with this ludicrous fantasy about sending his car in space.

  • Tesla makes cars that consume energy and batteries which store it, whereas Saudi Arabia produces energy. It still requires energy to charge Tesla's batteries, which on a mass scale means natural gas for power plants (unless we're going to blanket the country with solar cells and wind farms) - Saudi Arabia has the largest natural gas reserves in the world, thus is already hedged against oil.

    • Saudi Arabia has the largest natural gas reserves in the world, thus is already hedged against oil.

      They've also got something of an excess of insolation, which they could harness using solar thermal and/or PV. They are well-located to export that energy to something like half of the world, too...

      • That's true, but economically exporting photovoltaic charges from solar cells across the oceans and around the world (in carriers such as Hydrogen) will require a lot of R&D before it's viable.

        • There's no reason for Saudi Arabia to export electricity across the ocean. They have direct land routes to the approximately 6.5 billion people who live in Asia, Europe and Africa. That said, it's still not realistically economical at the moment due to losses over such huge distances -- hardly more realistic than ideas of covering the sahara in solar panels. And it would never have anywhere near the margins of oil.

    • Re: (Score:2)

      by Rei ( 128717 )

      It's much simpler. Saudi Arabia needs a hedge. There's no better hedge against oil than an EV manufacturer.

      • You can't hedge the production of one type of energy against the consumption of an alternate type of energy, so there are in fact much better hedges against producing oil than an electric car manufacturer.

        • Re: (Score:2)

          by Junta ( 36770 )

          The Saudis have a lot of money and the general thought is they are eager to not only hedge, but to diversify.

          Diversifying into a company that has the ambition to enable more renewable energy seems a reasonable complementary strategy. Whether Tesla shall be the company to best realize that remains to be seen. They seem to be more willing to do risky short term things than most of their competitors. Of course particularly on EV they have increasingly competent competition from the traditional automakers th

    • Saudi Arabia wants to be solidly entrenched in the world when their oil/gas runs out. So they are diversifying hard./p.

  • Why he tweeted becomes clear (Score:5, Interesting)

    by ebrandsberg ( 75344 ) on Sunday August 12, 2018 @09:33AM (#57111246)

    It was actually a way to convey information to a potential investor that protects him from SEC action. He had lined up terms with one player, but he doesn't 100% like the terms. He wants to have another player provide better terms, but if he revealed to the other player he had a particular price already matched, that would be enough for them to buy in and profit. By tweeting the price and that enough funding was lined up, it is made in a public way, so he can continue negotiating with the 2nd player ASAP. He didn't bother filing with the SEC before tweeting, because he didn't want to slow things down. He could have actually been negotiating with the 2nd player right as he tweeted, and use it as a public way to reveal information without even stopping the meeting.

    • Agree 100% Maybe not the most ethical way to negotiate a deal, but one that seems to be right for him at this time.

    • Re:Why he tweeted becomes clear (Score:4, Interesting)

      by Junta ( 36770 ) on Sunday August 12, 2018 @10:11AM (#57111442)

      protects him from SEC action.

      I don't see how this could possibly be true. Regardless of venue, an announcement of this nature is going to be (rightfully) subjected to a great deal of scrutiny. Doing it in an utterly public forum is *worse*, not better, if he did not, in fact, have a committed deal signed. It caused the stock to go up and he certainly benefited because the market took him at his word.

    • It was actually a way to convey information to a potential investor that protects him from SEC action.

      Musk's tweet was at 11:18pm (Eastern Standard), August 7.

      If no written confirmation from his funder exists prior to that, he's lying to investors and guilty of fraud. Tesla going private is smart. This move was so far away from smart that SpaceX could use it as a new means of space travel.

  • R.I.P. Tesla (Score:3, Interesting)

    by MadCat221 ( 572505 ) on Sunday August 12, 2018 @09:34AM (#57111258)
    Think about it... Saudi fund investing in Tesla. Oil wealth investing in disruptive technology that can potentially obviate the need for petroleum fuels. If this happens, they'll deep-six that company because it's a threat to their cash cow.

    • Re:R.I.P. Tesla (Score:5, Interesting)

      by ebrandsberg ( 75344 ) on Sunday August 12, 2018 @10:10AM (#57111430)

      There is a famous quote by Sheikh Rashid bin Saeed Al Maktoum "My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel."

      Maybe the SA leadership wants to end up driving Teslas instead of camels.

    • Well, oil ain't available forever. And even though the Saudis are sitting on top of the biggest oil reserves, the do know that it won't last forever.

      And they also know that the oil is the only reason the rest of the world puts up with them. They need an exit strategy, and fast.

    • The Saudis have been investing in solar, batteries, and generally diversifying away from oil income for a while now.
      They can see which way the wind is blowing and would rather prepare for the future than try to cling to the past, which is rather ironic, with regard to their religion.
      But even the recent change with women driving is an example of that, having half the population home-bound, not participating in the economy takes a heavy toll.

    • Re: (Score:2)

      by bazorg ( 911295 )

      Thats the cynical and conspiracy theory world view. An alternative to that is that Saudi Arabia will still sell oil for making plastics and many other useful products, while being involved in the business that replaces some of the oil burning for transportation. Much more money to be earned in business than in hoping that battery business will slow down.

    • Think about it... Saudi fund investing in Tesla. Oil wealth investing in disruptive technology that can potentially obviate the need for petroleum fuels.

      Thought about it. Makes perfect sense. The Saudi's long ago figured out that oil was too valuable to burn. Regardless of what happens in the car space there are some things certain: oil consumption will continue for reasons nothing at all to do with cars, oil production will decline eventually.

      The Saudis have for a long time been investing in alternatives to oil. Tesla is just a small part of it. e.g. The Saudis own 50.1% of the Canadian Wheat Board. They partnered with Softbank to turn it into a technolog

    • Think about it... Saudi fund investing in Tesla. Oil wealth investing in disruptive technology that can potentially obviate the need for petroleum fuels. If this happens, they'll deep-six that company because it's a threat to their cash cow.

      But Tesla's not like the now legendary everlasting-lightbulb guy. There are plenty of other people making electric vehicles, he doesn't have some magic secret.

  • This is the same news that have been circulating since the announcement over and over:
    Elon is in talks with big Tesla investor[s].
    Well, of course he's in talks with ALL big investors. Even if funding is secured to match all the valuation money - it's in Elon's best interest that all big investors keep their ownership instead of Elon having his 20% and the investor getting 80% of the company. This does not imply that funding is not secured!

  • Face it, Elon Musk is smarter than you (Score:5, Informative)

    by mykepredko ( 40154 ) on Sunday August 12, 2018 @09:43AM (#57111286) Homepage

    Clearly a lot of people want Musk and Tesla to fail and thought that the privatization messages that came out late last week was Musk losing it. I'm not a fanboy, but I must say there's a certain amount of amusement to be gained from seeing the posts and reactions of people who want him (and his businesses) to fail.

    Hate Musk and his products all you want, but don't try to bet against him.

    • it's just as likely he's gotten by on survival bias and a Steve Jobs grade reality distortion field. In other words, Charisma and guile. That's not inteligence, that's a skill (specifically, knowing how to manipulate people).

      Donald Trump is the President of the United States, but given a raft of blunders that I wouldn't expect from a third grader (at one point he said he met with the "President of the Virgin Islands"... they're a territory. He's their President...) I wouldn't consider him Smarter than me

      • Truer words has rarely been spoken. Welcome to the sane side

      • "inteligence"?

        Anyways, since humanity hasn't quite pegged down what intelligence is nor how to accurately measure it, I'm not sure what the debate is for. I believe many leaders past and present are low-iq knuckle draggers, yet possess large amounts of power over other humans. I'm not sure what that says for the so-called intelligence of humanity, either.

  • Tesla, now brought to you buy racist anti-gay bankers ;)
  • https://www.reuters.com/articl... [reuters.com] The Reuters article seems to be backed up better, but I don't put it past the Saudis to agree to talks to help them preserve the value of their recent open market stock purchase so they can to proceed to liquidate. Rei "forgot" to mention not only was SoftBank not interested last year in Tesla because they wanted Musk out, but they also said $300 a share was too expensive. From SoftBank, some of the dumbest money around. And this was when Tesla'a finances weren't nearly a
  • What's ironic about Musk's reckless tweet is that any buyout will now have to also include money to pay for potential lawsuit damages. Longs bought shares on Tuesday's announcement to see their gains disappear as doubts of Musk's truthfulness surfaced. Longs who were holding OTM calls at 420+ saw the value of their contracts drop as Musk effectively capped upside. Tesla is now liable for damages to both shorts and longs! Amazing, but as both sides can agree on, Tesla is a special case!
  • Wasn't this obvious from the start that the Sauidis would try to kill antil-oil motor companies from ever flourishing ?? World full of suckers.
  • Obviously negotiations are starting, no deal is finalized. $420 a share is the opening offer by the seller. It's capped. And Musk hurt his offer by potentially adding billions in liability costs to it. If you think shares are worth more than $420 you're saying PT Barnum doesn't value his own company enough. That's crazy. If I was a stock holder I'd dump it given how limited the upside is and how terrible the company's finances are.
  • The Saudis flexed their $ in latest protest against Some Canadian criticism. Tesla will have various self interests varying depending on investors but the Saudis sent a signal recently on meddling in their domestic affairs.
  • "Lol I waited around all weekend while grimes coddled her boyfriend for being too stupid to know not to go on twitter while on acid" https://www.rhymeswithsnitch.c... [rhymeswithsnitch.com]

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