Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout

Wolf Richter,

Two often-cited suspects are axed. So where’s the “secured” funding supposed to come from?

The whole scheme kicked off when Tesla CEO Elon Musk tweeted during trading hours that he was “considering” taking Tesla private, “Funding secured,” which caused the already ludicrously overvalued shares to spike. Later he added, “Investor support is confirmed.” But no details, no names, no tidbits, not even a tease. Two days earlier, he’d tweeted that “even Hitler was shorting Tesla stock.”

We can brush off the Hitler tweet as just one more Musk idiocy gone awry, but “Funding secured” and “Investor support is confirmed” are big-ass phrases for a public-company CEO discussing a buyout that would be valued at $72 billion.

Now some folks, including those at the SEC’s San Francisco office, are wanting to know where exactly this money is going to come from – and if funding was even remotely “secured.”

The Tesla true believers instantly figured that a deal had already been worked out, either with SoftBank or with Saudi Arabia’s Public Investment Fund (PIF), or with both, or whatever.

Turns out, it’s not going to be SoftBank, and it’s not going to be the Saudis, either. They’re not interested in creating the magic to pull this off.

Reuters reported today that a source “familiar with PIF’s strategy,” said that the fund was not, as Reuters put it, “currently getting involved in any funding process for Tesla’s take-private deal.”

PIF had made headlines recently when it came out that it had acquired a stake in Tesla of just below 5% by buying its shares (TSLA) in the market. None of this money went to Tesla. It went to Tesla shareholders that wanted to get out.

PIF has also heavily invested in other tech companies in the US, including a $45-billion investment in the Vision Fund, a venture capital fund that SoftBank, a Japanese holding conglomerate, has put together by pouring $100 billion into it.

We are primarily funded by readers. Please subscribe and donate to support us!

Reuters went on:

A second source close to the situation also said PIF was not taking part in any such plan at this stage. This source said that the Saudi fund would not make an investment of this kind without seeking guidance first from SoftBank.

SoftBank was struck off the list on August 8, when Bloomberg reported that Musk and Masayoshi Son, the founder and CEO of  SoftBank, had met in April 2017 to discuss a deal, “according to two people with knowledge of the discussions”:

The talks touched on taking Tesla private, but failed to progress due to disagreements over ownership. Musk proposed a structure that would have given him disproportionate control over the company through stock with supervoting rights, one person said. There are no active talks between the companies now, said the people, who asked not to be identified discussing private deliberations.

Reuters also reported a few days ago that SoftBank was not pursuing a deal for Tesla, given SoftBank’s investment in GM’s autonomous-vehicle unit, Cruise, which is considered a competitor of Tesla.

Tesla’s board of directors has not received any details on financing the buyout either, and now, roused from its benevolent sleep, is seeking more information from Musk, Reuters reported on Thursday. And it has not hired any advisors yet, which would be one of the first steps in a deal like this.

Wall Street investment banks, the heavy lifters that are needed when it comes to such mega deals involving tens of billions of dollars, appear to be clueless as well.

It’s easy to tweet. And for Musk, it’s easy to manipulate up the share price because Tesla investors are eager for him to manipulate up the share price. That’s why they own these shares. That’s how they’ve made money so far.

But actually manufacturing cars profitably in a market where you’re surrounded by pros who know what they’re doing is devilishly hard, and after ten years of trying, Tesla still hasn’t figured it out. Mass-producing cars and then successfully finishing and delivering these cars profitably is even harder to do, and Tesla is clueless about this particular end of the car industry.

And that still leaves the question unanswered: Why would anyone want to pay $72 billion for a permanently money-losing automaker that has only 0.2% of the global market?

Until all this take-private talk started, the only reason to own Tesla shares was Musk’s uncanny ability to manipulate up their price. How much cash Tesla was bleeding and how much money it was losing is irrelevant in this scenario because the bet was simple: Sell the shares later at an even higher price – Musk’s tweets would get you there. But once the shares are off the market, and selling to the greater fool is much more difficult, what would be the appeal of owning these ludicrously overvalued shares? That question is a tough nut to crack for rational minds.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.