(Bloomberg) -- Elon Musk said interest from Saudi Arabia’s sovereign wealth fund gave him the confidence to drop the bombshell last week that he was considering taking Tesla (NASDAQ:TSLA) Inc. private.
The Saudi Kingdom’s Public Investment Fund had approached Musk going back almost two years about taking Tesla off the market, he wrote in a blog post Monday, confirming that the fund recently bought an almost 5 percent stake. Musk described a July 31 meeting in which the Saudi fund’s managing director expressed regret that Tesla hadn’t moved forward with a go-private transaction.
“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,” Musk wrote in the post. He said this is why he tweeted on Tuesday that he had “funding secured” to take Tesla private at $420 a share.
Musk, 47, set off a firestorm last week with the highly unconventional way in which he announced Tesla may leave the public markets. His Twitter postings and a letter to employees -- made public in a post on the company’s blog -- made no mention of the Saudi fund’s involvement. Tesla’s board also released a three-sentence-long statement that only vaguely addressed how the company would be able to fund taking the company private at a market capitalization of more than $70 billion.
Legal Scrutiny
Several investors have since sued Musk and Tesla, claiming the company’s share price had been manipulated. The Securities and Exchange Commission is said to be intensifying its scrutiny of the company and its chief executive officer after having started gathering general information about Tesla and Musk’s earlier public pronouncements about manufacturing goals and sales targets.
One of Tesla’s biggest critics, Vertical Group analyst Gordon Johnson, read Musk’s blog post as a walk-back maneuver from his “funding secured” tweet last week. He cited Musk’s statement Monday that the Saudi fund’s support for taking Tesla private was “subject to financial and other due diligence and their internal review process for obtaining approvals.”
“He is specifically stating that funding is not secured, and I think that’s a big deal,” Johnson, whose $93 price target on Tesla shares is the lowest among Wall Street analysts, said on Bloomberg Television. “The question then becomes, what does the SEC do here, and do the shareholders stick with him?”
Musk said he’s continued to communicate with the Saudi fund managing director, whom he didn’t identify by name. He said he’s been reaching out to Tesla’s other large shareholders and that most of the capital required to take the company private will be funded by equity, rather than debt.
“The $420 buyout price would only be used for Tesla shareholders who do not remain with our company if it is private,” he wrote. “My best estimate right now is that approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.”
(Updates with analyst’s reaction starting in sixth paragraph.)
