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Saudi Arabia Reduces Its Exposure in Tesla

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Saudi Arabia, in a surprising move, took an insurance policy against its investment in Tesla, drastically reducing PIF’s exposure in the company. The news comes a few months after Elon Musk claimed that Saudi Arabia will back a Tesla deal to take it back a private company again.

The report was made public by Financial Times. It suggests PIF still holds its 4.9 percent share in the electric car maker and has taken itself out of the potential risk against a drop in share price.

Financial Times revealed PIF’s stake back in August 2018. As soon as news broke out, Elon Musk tweeted of Tesla going private with an estimated $420 per share. He also explained that the Saudis would be supporting a buyout. Security and Exchange Commission later charged those tweets as misleading, costing him a hefty fine of $20 million imposed by SEC.

PIF Seeks Out J.P. Morgan’s Help in Hedging Risk

The report further stated that PIF placed these hedges after markets closed on January 17th, 2019, with the assistance of J.P. Morgan bankers. Soon after, Tesla announced layoff of 3,000 of its workforce. After this news that PIF insured against share price drop, Tesla’s shares dropped by 2 percent and then sustained a moderate price level for that day.

Elon Musk told FT that he held no talks with PIF for several months and had no knowledge of the fact that FT still holds shares in Tesla. J.P. Morgan and PIF have so far declined to comment on the story when approached by news media outlets.

Saudi Arabia remains the world’s single largest oil exporter. This initiative of investing in the carmaker was taken by Crown Prince Mohammed bin Salman, an effort to try and diversify the nation’s economy. Besides Tesla, PIF has also invested in other companies such as Lucid, Sabic, Virgin Group, Uber, and SoftBank.  

Share your thoughts on PIF’s Decision to Hedge Against Tesla Shares in our forum.



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