Mubasher: As Tesla’s CEO Elon Musk announced that Saudi Arabia’s Public Investment Fund (PIF) would finance taking the electric carmaker private, the sovereign fund may not be able to handle the whole process, according to bankers familiar with the matter.
Musk said that PIF managing director Yasir al-Rumayyan had expressed his support for the company going private, while discussions with the PIF, as well as other investors, were still ongoing.
However, no signs yet of the PIF preparations to commit to the deal, bankers familiar with the secretive sovereign fund told Reuters, adding that the huge fund’s assets are still not liquid and cash availability is limited.
“They could handle part of taking Tesla private, but not necessarily a large part of it and certainly not all of it,” a banker at a major Gulf company in Saudi Arabia told the news agency.
The PIF’s assets are estimated to be more than $250 billion, given that the Saudi fund said last October that it had about $230 billion in assets under management, which has currently probably grown as a result of a rally in the Saudi stock market.
However, the PIF also has many financial and political claims on its resources, with stock exchange data revealing $140 billion of the fund’s assets are in major companies in the country, including Saudi Basic Industries (SABIC) and National Commercial Bank.
These firms’ shares would not be easily sold en masse, without driving their prices lower in the local stock market, while selling many of them would conflict with one of the PIF’s declared roles to help companies in the country to become “regional and global leaders.”
The PIF also has substantial commitments to other tech companies and investments, comprising a $45 billion deal to invest in a tech fund led by SoftBank.
The Saudi fund also invested another $3.5 billion in US ride-hailing firm Uber and $1 billion into Virgin Group’s space ventures, along with another $20 billion investment in an infrastructure investment fund planned with US private equity firm Blackstone Group.
In addition, the “PIF is not nearly as liquid as people might like to think,” an international banker who deals with the fund told the news agency.
On the other hand, state-run Saudi Aramco was in talks over purchasing a major stake in the Saudi Basic Industries Corporation (SABIC) from the PIF, the national oil giant said. The fund could get around $70 billion from selling its 70% holding in the petrochemical company.
Negotiations over Aramco's transaction are set to take several months, while the sovereign fund already committed itself to large projects in Saudi Arabia, including a $500 billion business zone, and real estate developments in Mecca and Medina, all of which aim to stimulate the domestic economy.
The PIF may also secure two infusions of cash in the next months, as it is targeting to raise between $6 billion and $8 billion in its first commercial loan, sources told Reuters.
