Looks like a private Tesla might get Saudi Arabia's backing
Following Elon Musk's announcement of his plans to take Tesla private, Tesla's shares had plummeted owing to no investors backing to the plan. However, Musk's fortune might be looking up now, with Saudi Arabia's sovereign wealth fund reportedly in talks to be part of any investor pool willing to take Tesla private. Considering the size of the fund, Musk might be in luck.
Saudi Arabia's PIF already has a 5% stake in Tesla
Saudi Arabia's Public Investment Fund (PIF) had already acquired a 5% stake in Tesla prior to Musk's controversial tweet announcing the move to go private. If reports are to be believed they're now keen to increase that and help Tesla go private, as part of Saudi Arabia's push to expand its wealth beyond the oil market, which hasn't been strong of late.
The privatization proposal, as it stands
While Saudi Arabia hasn't yet made a concrete decision on whether to increase its stake in Tesla or not, or by how much, it's understood that talks are still underway. Meanwhile, Tesla's investors are preparing to meet with financial advisers this week to evaluate Musk's proposal to go private, and have asked him to hire his own advisers.
Is a Saudi Arabia-aided buyout possible?
Notably, while Musk owns a 20% stake in Tesla himself, taking Tesla private by buying out other shareholders would cost the South African-born entrepreneur over $60bn. That's quite a lot of money, but reports of Saudi Arabia's interest is particularly interesting considering that Saudi is considering supercharging its PIF to a $2 trillion fund, with a major focus on investing in technology.
Crown Prince Mohammed bin Salman: A crucial factor?
Saudi Arabia's recent focus on technology and diversification have been largely driven by Crown Prince Mohammed bin Salman, dubbed 'MBS' by the Saudis. Since being named heir-apparent last year, the young Prince has been shaking things up in Saudi Arabia, and has already restricted the powers of the religious police, removed the ban on female drivers, and ushered in various other cultural reforms.
Saudi Arabia has huge plans under MBS
On the tech front, MBS is driving Saudi Arabia's tech policy and has appointed ex-Apple maestro Steve Wozniak as "tech ambassador". Additionally, MBS has also conceptualized Saudi Arabia 2030 - a huge national plan to diversify the primarily oil-dependent economy, and develop public service sectors like education, health, and infrastructure with the aid of technology. Then, there's MBS' planned $500bn megacity, NEOM.
A Saudi Arabia-backed privatization move doesn't seem implausible
Given the aforementioned factors, a $60bn or $70bn investment in Tesla to help it go private and push Saudi Arabia's own agenda of hedging against oil doesn't seem too implausible, considering that the amount would be pocket change for the PIF. While Musk might not be pleased with one big investor driving his privatization proposal, it might be his best bet.
