Musk confirms potential funding from Saudis to take Tesla private
Tesla founder Elon Musk says that Saudi Arabia's sovereign wealth fund has "expressed support" about providing funding for the electric car manufacturer to be taken private.
TESLA
$539.60
17:39 26/03/20
In a blog post on Monday, Musk said that since early 2017 the Saudi Arabian sovereign wealth fund had approached him "multiple times" about taking Tesla private, driven by "the important need to diversify away from oil".
After an initial meeting, Musk said "several additional meetings" had since been held "to reiterate this interest and to try to move forward with a going private transaction".
After buying almost 5% of Tesla stock through the public markets, the fund recently asked for another meeting, which took place on 31 July.
"During the meeting, the managing director of the fund expressed regret that I had not moved forward previously on a going private transaction with them, and he strongly expressed his support for funding a going private transaction for Tesla at this time. I understood from him that no other decision makers were needed and that they were eager to proceed," Musk said.
"I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving."
He said most of the capital required for going private "would be funded by equity rather than debt, meaning that this would not be like a standard leveraged buyout structure commonly used when companies are taken private", adding that reports that more than $70bn would be needed to take Tesla private "dramatically overstate the actual capital raise needed".
His mooted $420 buyout price "would only be used for Tesla shareholders who do not remain with our company if it is private", giving a "best estimate" that approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.
Since 7 August, Musk said he has continued to communicate with the managing director of the fund and he expressed his support for proceeding with the transition.
Last Tuesday Musk had announced his plans to take the company private via a rather vague Twitter message that he was "considering taking Tesla private at $420" and had "funding secured", later adding that he believed a move off the public markets was in the best interest of the company and its shareholders and that it would also accelerate the company’s mission.
In the blogpost, Musk explained that he had informed Tesla's board of his intentions in a personal capacity to take the company private three working days before the tweet.
As the announcement received criticism last week for its lack of detail, Musk said in the blog post he "felt it was the right and fair thing to do so that all investors had the same information at the same time".
He said he will now continue to talk with investors, and had engaged advisors "to investigate a range of potential structures and options", which among other things will provide a more exact idea of how many existing public shareholders would remain shareholders if Tesla goes private.
"If and when a final proposal is presented, an appropriate evaluation process will be undertaken by a special committee of Tesla’s board, which I understand is already in the process of being set up, together with the legal counsel it has selected. If the board process results in an approved plan, any required regulatory approvals will need to be obtained and the plan will be presented to Tesla shareholders for a vote."