But nearly two days later, it’s unclear where that funding will come from. Tesla has yet to submit any regulatory filings that provide more detail into Musk’s proposal, and, according to The New York Times , some top executives at major Wall Street Banks, like JPMorgan Chase and Citigroup, were not familiar with Musk’s intention to convert Tesla into a private company before he tweeted about it.
That raises the question: Where’s the money coming from?
Musk said he isn’t selling his 20% stake in the company and will allow current Tesla investors to keep their investments if a deal goes through, which means whoever provides funding for the deal won’t have to account for all of the over $70 billion valuation that would result from Musk’s proposed $420-per-share buyout price.
Still, dedicating tens of billions of dollars toward a single investment would be unusual for any single bank or investment firm, James Rosener, a partner at the law firm Pepper Hamilton who specializes in private equity and corporate financing, told Business Insider.
That leaves two options: a group of firms or a nation’s sovereign wealth fund.
Rosener said the latter is more likely, due in part to the fact that a deal would be difficult to finance through debt. Tesla, which has a history of burning cash quickly, wouldn’t inspire enough confidence in potential creditors that it could handle the interest payments a large amount of new debt would require.
A sovereign wealth fund could have the financial resources to buy equity with cash, Rosener said. He suggested Saudi Arabia, which was recently reported to have purchased a 3%-5% stake in Tesla, could be a possible candidate.
“Could it be [Saudia Arabia’s Crown Prince, Mohammad bin Salman] putting tens of billions of dollars in? It’s certainly manageable,” Rosener said.
Another obvious candidate, China, is much less likely due to the country’s reluctance toward inbound investment, according to Rosener.
Whether or not a deal goes through, Musk’s approach to potentially taking Tesla private has been unconventional, like much else he does.
“It’s certainly kind of a cavalier approach to a complex transaction. We’ll see if it works out,” Rosener said.
Have a Tesla news tip? Contact this reporter at email@example.com.
Rockstar has just dropped the first gameplay trailer for Read Dead Redemption 2, giving fans a chance to see the highly-anticipated title in action. The six-minute trailer is the first part of Rockstar’s gameplay demo and showcases a deeper and living open world, set at the pivotal moment in history when the age of outlaws...
Prepare for the year ahead with insights from today’s brightest minds. Join us at Business Insider’s flagship conference, IGNITION: Media, Technology & Transformation, now in its ninth year. Monica Schipper/Getty Images This year’s speakers are innovators transforming media, technology, and society. The lineup is packed with top executives from some of the hottest tech startups...