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Saudi Fund in Talks to Invest in Tesla Buyout Deal

Matthew Martin, Ruth David
Signage is displayed at the Tesla Inc. showroom in Newport Beach, California, U.S., on Friday, July 6, 2018. Photographer: Patrick T. Fallon/Bloomberg

Saudi Arabia’s sovereign wealth fund is in talks that could see it becoming a significant investor in Tesla as part of Elon Musk’s plan to take the electric car maker private, according to people with knowledge of the fund’s plans.

The Public Investment Fund, which has built up a stake just shy of 5 percent in Tesla in recent months, is exploring how it can be involved in the potential deal, said the people, who asked not to be identified talking about the matter. Discussions began before the controversial Aug. 7 tweet by Musk, who is Tesla’s co-founder and chief executive officer, saying he was weighing a plan to take the company private.

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The PIF sees its investment in Tesla as a strategic way for the world’s biggest crude producer to hedge against oil, the people said. The Saudi fund hasn’t made any firm decisions on whether to increase its stake, or by how much, but talks are ongoing, they said. It wasn’t immediately clear how much the fund would invest in Tesla.

Musk’s tweet stunned investors, with many raising questions about his claim that funding for the venture had been secured. While the entrepreneur owns 20 percent of Tesla, more than $60 billion would be needed to buy the business from public shareholders.

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The PIF didn’t respond to requests for comment, and Tesla declined to comment.

Wall Street is awash with speculation on who might team up with Musk to do a deal. Musk and his advisers are seeking a wide pool of investors to back a potential take-private of the automaker to avoid concentrating ownership among a few new large holders, according to people familiar with the matter. Musk has said he still expects to own about 20 percent of Tesla after any transaction, and that he hopes all shareholders will remain owners of a private company.

The U.S. Securities and Exchange Commission, which has been gathering information about Tesla’s public pronouncements on manufacturing goals and sales targets, is intensifying its scrutiny of the company’s public statements in the wake of Musk’s tweet, people familiar with the matter have said.

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Discussions over taking Tesla private have failed before. Musk and SoftBank Group’s Masayoshi Son held talks last year that touched on taking Tesla private, two people with knowledge of the discussions have said. The discussions failed to progress due to disagreements over ownership. The PIF is also a major backer of SoftBank’s Vision Fund.

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Reuters reported on Aug. 11 that the PIF has shown no interest so far in financing Musk’s proposed deal.

The PIF approached Musk several months ago to discuss buying a minority stake, but he initially resisted the investment and said there were no plans to issue new shares, according to a different person familiar with the talks at the time. As a result, PIF itself decided to buy about $2 billion in Tesla shares on the market with the help of an investment bank, the person said.

The current talks about the PIF potentially participating in a take-private started in recent weeks, the other people said.

The Saudi government is planning to turn the PIF into a $2 trillion powerhouse to help diversify the kingdom’s oil-dependent economy. In a tweet on Sunday, the nation’s Energy Department said that Saudi Arabia currently is working to develop a city to support the supply of raw materials and parts for the automobile industry. The goal is to reduce imports, increase exports, encourage foreign investments and provide jobs.

Updates with prior PIF/Musk contacts starting in 10th paragraph, Saudi tweet in final paragraph.

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