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

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.

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.

Read… Tesla Discloses Worst Quarterly Loss Ever, But Where Are the 17,000 Model 3 Cars it “Produced” But Didn’t “Deliver”? 
 

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  57 comments for “Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout

  1. Javert Chip
    Aug 11, 2018 at 7:49 pm

    Gosh, I was assuming Italian, Spanish banks, and, yes, Turkish Banks would be salivating at this opportunity to mega-increase their loan losses.

    Take THAT, ECB!

    • Ppp
      Aug 11, 2018 at 8:11 pm

      Erdogan will provide the money just as soon as he cancels all of Turkey’s other debts. Patience!

      • Ambrose Bierce
        Aug 12, 2018 at 10:25 am

        While you’re printing money print a few billion more and make your nation bulletproof. Do you think there would be sanctions against Iran if they owned 5% of Tesla?

    • nick kelly
      Aug 13, 2018 at 2:06 pm

      ‘That meeting took place on July 31st. … I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed.’

      This looks like an attempt to walk back the announcement of ‘funding secured’ to escape at least criminal liability.

      The problem is that ‘Could be closed” of course means not yet closed.
      So how can you announce funding secured?

      If Musk can convince the SEC that he thought he had a verbal deal, with apparently nothing in writing, AND that he is such a naive that he thought this was enough to announce ‘funding secured’ he may be off the main hook.

      • Buckaroo Banzai
        Aug 13, 2018 at 11:06 pm

        My guess is, the Saudis bait-and-switched Elon in order to humiliate him. It probably isn’t much more complicated than that.

  2. Peter Boardman
    Aug 11, 2018 at 7:49 pm

    At least Tesla hasn’t promised a car powered by “clean coal” – yet…

  3. Old dog
    Aug 11, 2018 at 7:59 pm

    It appears that there’s a Tesla investor born every minute.

  4. alex in san jose AKA digital Detroit
    Aug 11, 2018 at 8:08 pm

    First I’m hearing on the radio that Musk is considering taking Tesla off of the stock market, making it private (I assume because there’s less oversight and he can bilk more people out of their money) and now he’s looking at selling it to the Saudis?

    Because if there’s one thing that will benefit the Saudi economy/kingdom, it’s electric cars …

    In other news, according to Reddit, Musk is selling Tesla-branded short-shorts. No, not stock advice, actual “Daisy Duke” style shorts.

    • Aug 11, 2018 at 8:28 pm

      “Taking Tesla private” at $420 a share means Musk has to come up with the money to fund this $72 billion deal. So this would be a buyout. The two big entities that were cited as source of these funds — the “secured funding” — were the PIF and SoftBank. Now both are off the table.

      • Tom Stone
        Aug 11, 2018 at 9:40 pm

        Wolf, it’s gotta be UBER!
        Look how similar their business plans are, “Blow smoke and burn cash”.
        It’s a no brainer.

  5. Maximus Minimus
    Aug 11, 2018 at 8:13 pm

    Competition for attention in Twitterspace is fierce. Look at the positive side, at least we don’t hear about mission to Mars.

  6. Stratego
    Aug 11, 2018 at 8:57 pm

    There are also stories around that some of the short sellars have filed suit against Musk saying he either needs to show this tweet is legitimate or else Musk is guilty of fraud in an attempt to illegally boost and manipulate the stock price.

    Musk may have made an expensive mistake when he sent that tweet.

    • SA
      Aug 12, 2018 at 2:16 pm

      I’m glad somebody filed a civil suit, this will be the ultimate means of forcing Musk and Tesla’s hand at proving the claim otherwise they’ll face a judgement in court. We all know the SEC with its investigation since it never does. There are too many unpleasant “collateral consequences” that will result with them coming out with anything even remotely proving the fact that Musk got too overzealous and is now on the hook. I wouldn’t be surprised if they’re working with Tesla’s board to help find some way to make Musk’s stunt appear legal.

  7. Banded
    Aug 11, 2018 at 9:02 pm

    “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.”

    So, Musk is really good at pumping up the public stock price of his company. But Musk has been really bad at actually building cars and actually making a profit.

    Therefore, why on earth would anyone want to invest a huge amount of money into a company to take it private AND with Musk keeping control of the company. His one actual skill becomes useless to the company in this deal, and the new investors would be betting a big giant pile of money that Musk can do the things he’s proven to be awful at … making cars and profit.

  8. roddy6667
    Aug 11, 2018 at 9:04 pm

    I can’t imagine any investor who can use a spreadsheet or even a calculator wanting to buy Tesla. It’s a turd circling the bowl. Perhaps Jordan Belfort (Wolf Of Wall Street) or his ilk could do a massive Pump And Dump, make a few billion, and go to a country without extradition treaties.

    • JZ
      Aug 12, 2018 at 10:08 am

      Elon does two things.
      1. He does projects used to be done by governments. Electrical cars, Space exploration, Digging tunnels and he even twitter about cleaning up water for Flint or saving kids. Why these are projects done by government historically? Because it lose money, profit could be large but far away in the future and investment is huge.
      2. Elon could make these project sexy enough that made people forgot about the nature of these projects in terms of financial gains. Elon built cool cars and rockets and people confuse good product with good companies making good profits.

      As long as Elon could keep telling stories and pool money from the “market” saturated with FED printed money, Elon thrives. Now, FED printer stopped and people started to ask where is the “money” as opposed to discussing “how cool telsla cars are or what’s future”.

      But still remember, since he is doing government job by using public market funding, somebody in the .gov may point a gun at Saudi’s head and say “buy shares at 420$”.

      For me, shorting Telsla means 70$ risk, 150$ potential gain with 50% probability and you don’t have to wait long to find out.

      Elon’s tweet is smart. Since the sexiness of the car effect is gone, he needs to other attention distractor to direct people’s attention away from using calculator or spread sheet to compute the “value” since with a buy out is possible, what your calculator say does NOT matter so nobody would bother.

      • Ambrose Bierce
        Aug 12, 2018 at 10:29 am

        You had me until you said “Fed printer stopped”

  9. raxadian
    Aug 11, 2018 at 9:05 pm

    So Musk could have got rid of Tesla the money sink about a year ago and didn’t because of his ego? Idiot.

  10. Gershon
    Aug 11, 2018 at 9:05 pm

    The SEC has roused itself from its coma to launch an investigation. Expect slap on the wrist fines, but no actual consequences from this most worthless and co-opted of regulatory agencies.

  11. EEngineer
    Aug 11, 2018 at 10:08 pm

    Perhaps he should petition to join the EU… Mario said he’ll do whatever it takes. Now that would be some impressive QE!
    /snark

    Meh, I paid cash for my LEAPS so watching Elon wiggle on the line and sink the hook that much deeper is actually quite amusing. Anyone using margin for this roller-coaster deserves the (repeated) beating they’ve received.

    Perhaps the goal of the tweets was to get himself relieved of command before the ship sinks. That would allow him to protect his fragile ego with a bit of “I could have saved it if they hadn’t mutinied” denial.

  12. Kiers
    Aug 11, 2018 at 11:13 pm

    Could the estate of Nikolai Tesla, (the real genius) SUE Must for besmirchment of his “good” name? I mean, really…..this is the limit. or is it…..

    • kiers
      Aug 11, 2018 at 11:14 pm

      *SUE Musk (!)

      • Ricardo
        Aug 12, 2018 at 5:07 am

        SUE Must
        SUE Musk

        Go on say it. You really wanted to say
        SUE Mask…… because he truly hides behind one.

  13. Rates
    Aug 12, 2018 at 12:07 am

    I’ve heard credible rumors about either one of these or both together buying out Tesla.

    1. WolfStreet LLC.
    2. The Federal Reserve.

    • Aug 12, 2018 at 8:46 am

      WolfStreet LLC does not comment on unsubstantiated speculation.

      :-]

      • Saltcreep
        Aug 13, 2018 at 5:13 am

        I’d suggest that a certain Mr. Elon Musk would contend that WolfStreet LLC regularly engages in unsubstantiated speculation… :)

  14. B
    Aug 12, 2018 at 12:22 am

    Maybe privatize the gains, publicize the losses is what is being applied here. The lack of oversight by the SEC is one thing, but if an investor(s) cannot be found and no charges are filed, the rule of law is well and truly gone. Musk is now up there with evagelical ministers begging for cash between flights on the gulf stream. “Hey guys, we’re going to Mars!”…LOL

    • Mike Earussi
      Aug 12, 2018 at 9:45 am

      Mars, Heaven, what’s the difference? Musk is about as likely to attain one as the other.

      His preaching skills are up there with the best. The only thing he lacks is a glass cathedral for critics to throw stones (meteorites?) at.

    • van_down_by_river
      Aug 12, 2018 at 2:52 pm

      Since when does “the rule of law” apply to wealthy aristocrats? The only time a wealthy con man gets punished is when he makes the mistake of ripping off other aristocrats (Bernie Madoff had a lot of wealthy investors as did Kenneth Lay – big mistake). Musk’s investors appear to be mostly prols, muppets and foreigners and as far as regulators and enforcement agencies are concerned Musk could murder any of those guys in broad daylight in the middle of Time Square and still skate. Well healed investors have likely steered clear of Tesla so who has been harmed? not anyone that matters. You think Buffet and Munger own TSLA – not a chance. The people victimized by this manipulation are of no importance and are not worth turning over apple carts to rescue.

  15. Tang
    Aug 12, 2018 at 4:04 am

    Hey. The Piper’s tune is magic. Is mesmerising. Like rats the tailing crowd follow, dance to the tune, jumping here, jumping there, but not knowing where. And on they go. For sure the Piper will bring them there.

  16. Blockhead
    Aug 12, 2018 at 4:37 am

    Sounds like Trsla would be a perfect takeover candidate for Amazon, since Amazon does not need to make a profit. Tesla will push up total sales and drive up Amazon’s share price. It’s a match made in heaven.

  17. Gavin
    Aug 12, 2018 at 7:41 am

    Elon Musk is the Lance Armstrong of the tech space. Does the media challenge Musk? No, not really? They didn’t challenge Armstrong, either. After all, didn’t he win 7 tours all illegitimately?

  18. xear
    Aug 12, 2018 at 8:01 am

    Elon Musk is a made man. This is not a crime like it would be for any of us.

  19. B Wilds
    Aug 12, 2018 at 8:03 am

    With his now infamous Tesla “going private” series of tweets Elon Musk has created a huge dust-up. Questions are surfacing such as where or who is the bank and is the SEC going to push hard and demand Musk is not just jawing the stock higher. The type of questions being asked suggests Tesla could come under an enforcement investigation if regulators develop evidence that Musk’s tweet was misleading or false.

  20. AV8R
    Aug 12, 2018 at 8:44 am

    Its the Russians.

  21. Glen
    Aug 12, 2018 at 9:38 am

    “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”

    Gee, you think Musk might take a billion or two and buy some auto executives with experience.

    Which implies he already did, and then fired them after they gave him practical answers he didn’t like

    or

    He hasn’t hired any and is completely nuts.

    Either way, it suggests no adults are running this company and investment in the stock (at these prices) is nuts. Just as we looked back in horror at pets.com

  22. Unamused
    Aug 12, 2018 at 9:41 am

    ->It’s easy to tweet.

    What happens on twitter stays on twitter, unless it escapes through a hole in the fabric of space-time.

    ->”even Hitler was shorting Tesla stock.”

    Hitler has never shorted Tesla stock. His assets went into a trust fund when he retired in Argentina.

    ->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

    Baloney is free speech. Has been for months now. Everybody knows that.

    ->Why would anyone want to pay $72 billion for a permanently money-losing automaker that has only 0.2% of the global market?

    Tax write-offs. Big ones. Not everybody made it to Panama.

  23. Aug 12, 2018 at 9:55 am

    Regardless of how inept the SEC has been these past 20 years, this Musk grandstanding may be too much even for them. We could be witnessing the genesis of another corporate flame-out like Enron/MCI. One assumes that the SEC does not want to be asleep at the switch if that is a possibility because if it does go that way the SEC would be torn to pieces by Congress, investors and bond holders.

    • van_down_by_river
      Aug 12, 2018 at 3:05 pm

      I will assume you are being sarcastic.

      Congress – they don’t care (in fact Musk contributes to campaigns)

      Investors – Investors have no power or sway with SEC and besides investors like stock manipulation.

      Bond Holders – They get to pick up the scraps in BK court. The Tesla brand will still have value and someone will pay good money for it (I think Tata would be interested in buying up assets in BK).

  24. RepubAnon
    Aug 12, 2018 at 10:07 am

    My guess is that the glamour is gone, and Tesla will be bankrupt within a year. Here’s Tesla’s memo to its employees – it sounds like what the captain of the Titanic might have told the crew:

    Taking Tesla Private
    August 7, 2018
    The following email was sent to Tesla employees today:

    Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

    First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.

    I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve.

    This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. This is not to say that it will make sense for Tesla to be private over the long-term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.

    Here’s what I envision being private would mean for all shareholders, including all of our employees.

    First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium.

    Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.

    Third, the intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. However, the structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months.

    Finally, this has nothing to do with accumulating control for myself. I own about 20% of the company now, and I don’t envision that being substantially different after any deal is completed.

    Basically, I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible.

    This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.

    Thanks,
    Elon

    • robt
      Aug 12, 2018 at 12:25 pm

      “If the process ends the way I EXPECT IT WILL, a private Tesla would ultimately be an enormous opportunity for all of us.”
      Well that seems to be a pretty firm statement, not quite like ‘financing secured’, but definitely an expression of expectation of a plan fulfilled.
      Maybe he could do the privatization like the old Lloyd’s of London model: call the shareholders ‘names’, or ‘partners’, and require them to pony up contributions to cover any losses in any years. Employee shareholder-partners could take a reduction in wages or work for free if they don’t have the cash. In the good years, when lots of profit is made, they get to share the windfall gravy train.
      As far as the required 50 Billion, or whatever, he just needs to redeem shares from willing sellers by issuing payment in bonds with a convertibility feature and maybe pay interest in shares. Gives a whole new meaning to the word ‘bond’, and it would be an interesting calculation to determine what the shares are worth. A nice round figure of a thousand dollars comes to mind. And the plan would include returning as a public company with perhaps 60 or 70 Billion in debt!
      We live in interesting times, where capitalism has been almost completely replaced by financial engineering in the last couple of generations, so anything’s on the menu, and anything can be possible and even believed.

  25. Rates
    Aug 12, 2018 at 10:26 am

    Careful now Wolf, because Bloomberg is now reporting that the Saudis are in fact interested.

    • Aug 12, 2018 at 10:40 am

      Even if they’re now talking about a potential investment, it still doesn’t constitute “Funding secured.”

      • aqualech
        Aug 12, 2018 at 11:19 am

        It’s becoming abundantly clear – to be a Tesla bull requires faith over logic. As in claiming that some ongoing discussions are relavent to the “secured” issue. Same for lots of darling stocks in bubbles. Eventually the end is similar. Fortunes made on hype and lies and lots of bag holders.

      • Rates
        Aug 12, 2018 at 12:48 pm

        I bet you he has funding secured for a buyout at 240. He just got the “details” wrong.

    • Prairies
      Aug 12, 2018 at 12:20 pm

      Stating funds are secured prior to the interest is where the crime of such stock manipulation rises. I could be interested, you could be interested. But that wouldn’t hold up as “secured”, secured would be documented and signed off.

      • Rates
        Aug 12, 2018 at 7:35 pm

        There are also a number of forms you have to fill out that are still missing.

        I think Elon Musk has secured financing from ….. Solar City!!!!

        Since the state of California is giving Tesla subsidies perhaps Calpers can take it private to seal the deal.

    • Altandmain
      Aug 12, 2018 at 11:05 pm

      Looks like the Saudis are going to have to find a new bank to work with them on this if the choose to pursue.

      https://www.bloomberg.com/news/articles/2018-08-12/softbank-is-said-to-shun-tesla-deal-amid-focus-on-other-car-bets

      Softbank isn’t interested.

  26. Cortado
    Aug 12, 2018 at 7:09 pm
  27. CA
    Aug 13, 2018 at 11:26 am
  28. Mean Chicken
    Aug 13, 2018 at 1:38 pm

    Yep, time to get all charged up!

  29. MarcLord
    Aug 13, 2018 at 2:28 pm

    No mention of all the (newer, cheaper, better) competitor EVs coming out this model year from luxury marques. Mene, Mene Tequila Upharsin:

    https://www.greencarreports.com/news/1117536_2019-is-the-year-of-the-electric-suv

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