Musk Tweets He Is “Considering Taking Tesla Private” After Saudis Reveal $2Bn Stake

Update: Never one to miss an opportunity, Elon Musk has just tweeted that he is considering taking the carmaker private at a price of $420, and even suggests he has the funding…

We are not so sure if that is even legal to say and neither are investors… and who is providing that loan? At what rate? If this is even close to true, TSLA debt should tumble (in price)…

This seems like nothing but a huge attempt to create a short squeeze…

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Did we just find the latest greater fool?

The FT reports that Saudi Arabia’s sovereign wealth fund has built a significant stake in Tesla – the latest bold bet by the state fund overseen by powerful crown prince Mohammed bin Salman.

Saudi’s Public Investment Fund (PIF) built the undisclosed stake of between 3 and 5 per cent of the electric vehicle maker’s shares this year, according to people with direct knowledge of the matter.

Interestingly, The FT reports that PIF initially approached Musk about purchasing newly issued shares but Musk reportedly rebuffed the offer – perhaps anxious of the perception of further dilution and the promises he made of  the need for more capital.

Note, however, that Tesla gets $0 from this secondary market investment – at a time when the carmaker is losing a record amount of money.

Tesla shares are jumping on the news…

And TSLA bonds are up but remain considerable “cheaper” than stocks…

The Saudi state fund reportedly acquired the position in secondary markets with the help of JPMorgan – which is odd since JPMorgan has an ‘underweight’ on TSLA with a profit target of $195 (a great way to get the stock lower for their wealthy gulf clients).

And all this coming just weeks after Aramco suddenly decides to raise billions in debt instead of IPOing?

More recently, the PIF has been in talks with global banks to borrow between $6bn and $8bn, marking the first time that the vehicle entrusted with driving the kingdom’s economic transformation will directly tap banks to fund its mission.

A skeptic might wonder whether, since Tesla can’t buyback stock directly using debt-issuance (WACC too high), it is using US bond investors as a source of funds and Saudis as the proxy buyer to achieve the same effect.

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Author: Tyler Durden