Last week, Tesla CEO Elon Musk announced his intention to take the automaker private. But speculation quickly arose that the claim was just a clever ploy to drive up the company’s share price and burn short sellers, a group Musk seems to have a particular disdain for. This resulted in aÂ shareholder complaint,Â filed Friday as a securities-fraud class action in federal court in San Francisco, alleging he lied to manipulate shareholder prices.
However, theÂ Securities and Exchange Commission was already investigating the matterÂ at the time of the lawsuit’s filing. While the bulk of the initial investigation involved asking Musk if he was lying, it’s presumably advanced in scope and complexity since then.Â The lynchpin to the whole issue is whether Tesla actually secured the billions in funding necessary to go private. Even though the CEO said the money is real, he did not specify who would provide it.
That changed on Monday morning, when Musk pointed to oil-rich Saudi Arabia. But it’s not as simple as it sounds.Â
“On August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share. This was a 20 [percent] premium over the ~$350 then current share price (which already reflected a ~16% increase in the price since just prior to announcing Q2 earnings on August 1st),” Musk wrote on the company’s website.
“My proposal was based on using a structure where any existing shareholder who wished to remain as a shareholder in a private Tesla could do so, with the $420 per share buyout used only for shareholders that preferred that option.”
Afterwards, he said the company began reaching out to Tesla’s largest investors and figured the Arab nation was a lock, as the Saudi Arabian sovereign wealth fund approached him aboutÂ taking Tesla private on multiple occasions.
“They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil,” Musk explained. “They then held several additional meetings with me over the next year to reiterate this interest and to try to move forward with a going private transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.”
Another meeting took place on July 31st, shortly afterÂ the Saudi fund purchased almost 5 percent of Tesla stock through the public markets, to tell Musk its position had not changed. Musk says he’s been in contact withÂ the fund’s managing director as they iron out the details. Apparently the Saudis have to complete an internal review process for obtaining approvals and want more details on what taking Tesla private would mean.
“Another critical point to emphasize is that before anyone is asked to decide on going private, full details of the plan will be provided, including the proposed nature and source of the funding to be used,” Musk continued. “However, it would be premature to do so now. I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors, which is something that I always planned to do since I would like for Tesla to continue to have a broad investor base.”
It’s basically a done deal, except not at all. And he can’t talk about it yet.
Once it’s actually time, Musk said Tesla’s board will thoroughly evaluate the plan before shareholders put it to a vote. However, there’s a chance that it won’t include Saudi Arabia.Â Chinaâ€™s internet and tech giant, Tencent, also holds about 5 percent of Tesla’s stock and the nation seems obsessed with electric car companies lately. The nationÂ even created a slew of government-backed EV startups in the hopes that allowing them to fight it out will forcibly evolve several into powerful monsters. It’s basically PokÃ©mon, if you swapped the cartoon animals out for burgeoning automakers.
Assuming the deal doesn’t go through in the Middle East, China seems the second most likely candidate to privatize Tesla.