Saudi Arabia’s sovereign wealth fund has repeatedly recommended converting electric carmaker Tesla to a private company, founder Elon Musk said Monday, and may back his proposal to do so now.
The managing director of the fund, which holds a 5 percent stake in Tesla already, met with Musk most recently on July 31 and “expressed regret that I had not moved forward previously on a going-private transaction with them,” he wrote in a blog post on the company’s website. “He strongly expressed his support for funding a going-private transaction for Tesla at this time.”
Musk said his understanding from the investor that no other approvals were needed and that the fund was “eager to proceed” was the basis for his statement on Twitter last week that funding for the transaction had already been secured, a comment that the Wall Street Journal reported had drawn the attention of the Securities and Exchange Commission. Corporations making such announcements typically do so via press release, either before or after the New York Stock Exchange’s regular trading hours of 9:30 to 4 p.m., not on social media.
“I felt it was the right and fair thing to do so that all investors had the same information at the same time,” Musk said. “I will now continue to talk with investors, and I have engaged advisers to investigate a range of potential structures and options. Among other things, this will allow me to obtain a more precise understanding of how many of Tesla’s existing public shareholders would remain shareholders if we became private.”
The proposed offer of $420 a share represented a 23 percent premium to Tesla’s Aug. 6 price of $341.99. but it raised eyebrows since the number is also a euphemism for marijuana smoking.
“Disclosing news of this nature via Twitter is unprecedented and, according to a former SEC chairman, may constitute fraud if Tesla does not already have the financing lined up,” Colin Langan, an anayst with Swiss lender UBS, said afterward. Musk’s proposal would be worth $88 billion, and even if both he and Chinese investor Tencent retained their stakes, the cost would be $71 billion, Langan noted.
Musk said the actual cost is much lower since the $420-a-share figure would be paid only to those shareholders who opt not to remain with the private company.
