Saudi Arabia fund invests in Tesla

6 years ago - Published in Alternative investments

Saudi Arabia’s sovereign wealth fund has acquired a significant position in Tesla shares, according to the Financial Times.

The PIF’s stake is expected to comprise between 3% and 5% of Tesla’s shares, in what could be seen as yet another bold bet by Saudi Arabia Crown Prince Mohammed bin Salman, according to people with direct knowledge of the matter.

The Saudi fund approached CEO Elon Musk about buying newly issued shares, the report said, but Tesla declined. Instead the Public Investment Fund bought the shares in secondary markets. 

Reuters later confirmed the Saudi fund bought a stake “at just below 5 percent” of the company, according to a source familiar with the matter.

Data from Bloomberg estimates that the Saudi PIF currently stands as one of the company’s top eight shareholders.

The Saudi PIF has reportedly attempted to take a stake in Tesla for some time, with the fund approaching Elon Musk to express its interest in buying newly-issued shares of the electric car maker — an offer reportedly declined by Musk. Nevertheless, the PIF was still able to take a stake in the company in secondary markets with the assistance from JPMorgan. The FT’s sources claim that Elon Musk and Tesla are aware of the Saudi PIF’s stake in the company.

The PIF’s interest in Tesla is quite understandable, with the fund being linked to several sustainable energy initiatives. In his visit to the United States, Crown Prince Mohammed and SoftBank founder Masayoshi Son announced a project aiming to create the world’s largest solar power generation project, which is expected to cost around $200 billion. If any, the PIF’s stake in Tesla appears to be part of the Crown Prince’s attempts to steadily direct his country’s economy away from its reliance on fossil fuels.

The announcement of PIF’s stake in Tesla comes in the aftermath of Tesla’s Q2 2018 earnings report, when Elon Musk stated that the company does not expect to raise more equity in the near future. Despite this stance, Musk also stated that the company “could raise money” if it really needed to.

“We do not – we will not be raising any equity at any point, at least that’s – I have no expectation of doing so, do not plan to do so. For China, I think, our default plan will be to use essentially a loan from the local banks in China and fund the Gigafactory in Shanghai with local debt, essentially. And we certainly could raise money, but I think we don’t need to and we – yeah, I think, it’s better to – it is better discipline not to,” Musk said.