Saudi Arabia’s sovereign wealth fund is in talks that could see it possibly becoming a significant investor in Tesla as part of Elon Musk’s plan to take the electric car maker private, according to a person with direct knowledge of the fund’s plans.
The Public Investment Fund, which has built up a stake just shy of 5 per cent in Tesla in recent months, is exploring how it can be involved in the potential deal, the person told Bloomberg on condition of anonymity.
Discussions began before the controversial August 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 Saudi PIF (Public Investment Fund) sees its investment in Tesla as a strategic way for the world’s biggest crude producer to hedge against oil...
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.
'Natural financing partment'
Even as investors and analysts viewed PIF as a natural financing partner for Tesla, the sovereign wealth fund has poured tens of billions of dollars into technology investments, including $45 billion in SoftBank Group Corp's Vision Fund over five years.
A source familiar with PIF’s strategy told Reuters that the Saudi fund would not make an investment of this kind without seeking guidance first from Softbank.
The Tesla board will make a decision on whether to hire advisers and launch a formal review of Musk's take-private proposal in the coming days, based on how much detail on the financing plan it receives from Musk, a third source said.
Removing the pressure
Tesla is facing a make-or-break moment in its eight-year history as a public company, as competition from European automakers is poised to intensify with new electric vehicles from Mercedes, Audi, BMW and other rivals.
Taking Tesla private would remove the pressure from Musk coming from hedge funds betting that the company's stock will drop given its production issues and negative cash flow.
It would also remove the company from the glare of Wall Street that comes with reporting quarterly earnings publicly.
Musk's tweet last week stunned investors, with many raising questions about his claim that funding for the venture had been secured.
While the entrepreneur owns 20 percent of Tesla, more than $60 billion would be needed to buy the business from public shareholders.
The PIF didn't immediately respond to requests to comment.