People have been trying to figure out what Tesla CEO Elon Musk meant when he tweeted last week that he wanted to take the electric car brand private and that funding for a deal had been "secured."
It came as a surprise to Wall Street bankers, who would normally finance such a colossal transaction. And regulators at the Securities and Exchange Commission were asking whether Musk had a factual basis for saying so confidently that he had funding in the bag.
Now Musk says the "funding" can come from Saudi Arabia, which recently acquired a stake in Tesla. He explained in a Monday blog post that the statement in his tweet was based on an informal understanding with the managing director of the kingdom's sovereign wealth fund.
Unusual, to say the least. Tesla shares were down roughly 1.4% on Monday, trading around $351 a share. (Musk has said that he wants to take the company private at $420 a share; the current price shows that investors are skeptical about this plan.)
Musk added that he will now continue to talk with investors "to obtain a more precise understanding of how many of Tesla’s existing public shareholders would remain shareholders if we became private." A final proposal would still need to be evaluated by the board and legal counsel, and if both approve the plan, "any required regulatory approvals will need to be obtained and the plan will be presented to Tesla shareholders for a vote."
Here's Musk, from the post (and you can read the whole thing here):
Why did I say “funding secured”?
Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private. They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil. They then held several additional meetings with me over the next year to reiterate this interest and to try to move forward with a going private transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.
Recently, after the Saudi fund bought almost 5% of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st. During the meeting, the Managing Director of the fund expressed regret that I had not moved forward previously on a going private transaction with them, and he strongly expressed his support for funding a going private transaction for Tesla at this time. I understood from him that no other decision makers were needed and that they were eager to proceed.
I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to “funding secured” in the August 7th announcement.
Following the August 7th announcement, I have continued to communicate with the Managing Director of the Saudi fund. He has expressed support for proceeding subject to financial and other due diligence and their internal review process for obtaining approvals. He has also asked for additional details on how the company would be taken private, including any required percentages and any regulatory requirements.