Elon Musk will partner with the sovereign wealth fund of Saudi Arabia to take the carmaker he founded, Tesla, into private ownership.
Last week Mr Musk indicated on social media his interest in taking the company off the stock market, and said he had secured funding to do so.
Many market participants contacted by FTAdviser expressed skepticism the estimated $70bn (£55bn) required to buy all of the shares not owned by Mr Musk could be funded by a sole investor.
But in a blog post on his company’s website this afternoon (13 August) Mr Musk said the sovereign wealth fund of Saudi Arabia has indicated it would back such a proposal, motivated at least in part by a desire to move away from a reliance on oil for economic growth.
The Saudis said they would back the proposal subject to due diligence and regulatory approval.
The sovereign wealth fund of Saudi Arabia has assets of about $250bn (£195.5bn), so backing the Tesla proposal would require it to deploy more than a quarter of its assets to own one company, something such funds are typically loathe to do.
Mr Musk said he expected about two thirds of the existing shareholders in Tesla to back the proposal and to remain shareholders in the company if it left the stock market. This would reduce the amount of capital needed to take the company private as those shareholders would not need to be bought out.
He said the Tesla board had agreed Mr Musk would reach out to some of Tesla's largest shareholders to discuss the proposal.
Mr Musk said: "Our largest investors have been extremely supportive of Tesla over the years, and understanding whether they had the ability and desire to remain as shareholders in a private Tesla is of critical importance to me. They are the ones who believed in Tesla when no one else did and they are the ones who most believe in our future.
"I told the board that I would report back after I had these discussions."
The fourth largest shareholder in Tesla is Edinburgh-based fund house Baillie Gifford which owns, on behalf of clients, about 7.7 per cent of Tesla shares across various funds.
James Anderson, who runs Baillie Gifford's £7bn Scottish Mortgage investment trust, has Tesla as its fifth largest investment and he has indicated he would have no problem keeping the shares if the company went private.
Scottish Mortgage is permitted to have as much as 25 per cent of its capital deployed in unquoted businesses, something not permitted of many active funds, and the trust would be able to keep hold of its Tesla stock without exceeding this limit.
Mr Anderson has previously stated Tesla is the stock he gets most queries about from clients of his fund, who are worried about the lack of cash flow and profit.
On the other hand index funds, which invest in all of the companies in an index, are not generally permitted to hold investments in companies not listed on a stock market, and so would be required to sell.
Vanguard, which specialises in passive funds, owns just over 4 per cent of Tesla.
Adrian Hull, co-head of fixed income at Kames Capital said he avoided Tesla bonds, as he felt some investors had mistaken the "wanderlust of new world technology and equity price performance with being a good bond".
He said a change of ownership would likely make little different to the investment case for the bonds.
David Scott, who works at the firm of Andrews Gwynne in Leeds, said he thinks investors in Tesla were "gullible".
