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Whats Got us Talking

Funding Secured, or is it?

Image result for tesla logo

Has funding really been “secured” Elon seems to think so, but not every agrees.

 

It’s been just over a week since Elon poked the SEC bear with some tweets concerning taking Tesla private. After sending Tesla stock soaring 11.5% people started asking where Elon would get the 71.3 billion to take the company private (find out more here). Well we now know, or at least we think we do.

Show me the funding

According to Musk, the Saudi Sovereign Wealth Fund is not only backing the Tesla deal but has been pushing for this for the past year. Musk expanding on this the specifics of the fund’s interest and involvement in a blog post. In it, Musk describes how he and the fund have been in talks for almost two years. The Fund currently owns a stake just under 5% of Tesla and while there is no information on what their stake would be if they do fund the deal, we can assume that the Saudi’s would likely become the largest shareholder in the company.

Why would an Oil rich country want to buy an electric car company?

The Saudi Sovereign Wealth Fund was created as a hedge against the countries dependency on oil. Saudi Crown Prince Mohammed bin Salman, who heads  the fund, has been diversifying the fund into technology companies and away from oil. Tesla provides the ideal hedge for the fund. As of now there are 3.1 million electric cars on the road, but that’s expected to grow to 125 million over the next 12 years. With Tesla being the leading electric car manufacturer they are well exposed to this growth. By investing in Tesla Saudi Arabia will still profit as consumers switch from oil to electric.

So Funding is Secured?

Not exactly, Saudi fund has more than enough capital, 250 billion to be exact, but that funding isn’t as liquid as one would think. According to ReutersMore than half of its assets are tied up in large Saudi companies whose stocks could be difficult to sell en masse. ” Not only this but the fund has committed 45 billion to Softbank, and other 24.5 billion in other deals and investments. All these deals would make the 71 billion needed to take Tesla private not as secure as Musk might make it seem. On top of all this, no actual work has been started on a deal and the Saudi Fund has yet to make a statement concerning Tesla.

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