American EV carmaker Tesla was recently taken by surprise when its CEO Elon Musk tweeted that he was mulling the privatisation of the company, and that he’d already had “funding secured” and offered to purchase shares from holders who wanted to cash out for US$420 (far higher than the high-$200s low-$300s that the stock had been rallying around for at the time).
After outrage was sparked, Musk wrote on a blog post detailing his plan and where this ‘secured funding’ had come from, which mostly just pissed people off. Further, it offered insight into what goes on in his head, and (apparently) how little he knows about corporate privatisation.
So of course, he’s backed out of it and said that the privatisation move has been called off. But not before it had caused wider effects.
The Saudi officials from the Public Investment Fund (PIF) that was reportedly behind the proposed privatisation (and are already existing shareholders) were “unhappy” with the amount of attention that was brought upon them as a result of Musk’s reckless tweeting, according to Bloomberg. They were also unhappy that, as a result of that tweet, the US Securities and Exchange Commission launched an investigation into Tesla and Musk on the suspicion of stock manipulation, as a flurry of activity pushing Tesla’s stock up to as high as US$387 before trading was suspended definitely made a few people a little better off than they were pre-tweet.
The funny thing is that it’s emerged that the Public Investment Fund, while indeed looking for projects to help diversify their investments and get them solid revenue from outside the oil & gas industry, was not keen on putting all their eggs in one basket, which is exactly what privatising Tesla would demand. Instead, we know that PIF and Lucid Motors are in discussions over an investment that would amount to a total of about US$1-billion.
In addition to all this, German automaker juggernauts Volkswagen Group are looking at Tesla for potential investment, which is certainly an interesting development that was first reported by the Wall Street Journal. And while a VW-Tesla tie-up would be mightily productive, we reckon that VW will likely want to be more involved with Tesla’s operations than Elon Musk would be entirely comfortable with.
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