Tesla Inc (Nasdaq: TSLA) CEO Elon Musk on Monday identified Saudi Arabia as the mystery backer behind the offer Musk has teased to take Tesla private at $420 per share. TSLA stock gained less than 1 percent following the news, and analysts say Tesla still has a long way to go to make it to the private market.
Musk wrote a blog post explaining that the Saudi Arabian sovereign wealth fund, which already holds a 5 percent ownership stake in Tesla, has approached him multiple times about taking Tesla private. Musk met with fund officials on July 31.
“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,” Musk says.
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Tesla’s modest 0.2 percent gain on Monday suggests there’s still plenty of uncertainty among TSLA stock investors.
Loup Ventures analyst Gene Munster says Musk’s estimate that two-thirds of Tesla shareholders will roll their positions into a private investment vehicle implies the company will need to raise between $25 billion and $30 billion in funding for the transition.
“We still believe there is a greater than 50 percent chance Tesla is private in a year, and the blog post slightly increased those odds,” Munster says.
He says there are still several key steps Tesla must take before completing a deal, including constructing a syndicate, building a private investment vehicle to facilitate the transition of public investors to the private market and gaining regulatory approval.
“Our best guess is this will take three to nine months,” Munster says.
Tesla shareholders will also have to approve the deal, and CFRA analyst Efraim Levy says investors should think twice before casting their votes.
“Unresolved to us is how feasible or necessary it is for two-thirds shares to remain with existing stockholders and who else might be major buyers at a premium to open market prices,” Levy says. “Despite Musk protestations, we think remaining public has and will benefit TSLA.”
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CFRA has a “hold” rating and $380 price target for TSLA stock.
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Saudi Backing Doesn’t Cinch Tesla Inc (TSLA) Deal originally appeared on usnews.com
