Tesla Jumps As Saudis Reveal $2 Billion Stake

Did we just find the latest greater fool?

The FT reports that Saudi Arabia’s sovereign wealth fund has built a significant stake in Tesla – the latest bold bet by the state fund overseen by powerful crown prince Mohammed bin Salman.

Saudi’s Public Investment Fund (PIF) built the undisclosed stake of between 3 and 5 per cent of the electric vehicle maker’s shares this year, according to people with direct knowledge of the matter.

Interestingly, The FT reports that PIF initially approached Musk about purchasing newly issued shares but Musk reportedly rebuffed the offer – perhaps anxious of the perception of further dilution and the promises he made of  the need for more capital.

Note, however, that Tesla gets $0 from this secondary market investment – at a time when the carmaker is losing a record amount of money.

Tesla shares are jumping on the news…

And TSLA bonds are up but remain considerable “cheaper” than stocks…

And all this coming just weeks after Aramco suddenly decides to raise billions in debt instead of IPOing?

A skeptic might wonder whether, since Tesla can’t buyback stock directly using debt-issuance (WACC too high), it is using US bond investors as a source of funds (via Aramco’s bond issue) and Saudis as the proxy buyer to achieve the same effect.

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