Saudi Arabia Fund Pressed Tesla to Open a Middle East Factory, SEC Claims

Elon Musk’s plan to take Tesla private may have required the company to open a factory in the Middle East, a document released Thursday shows. The Securities and Exchange Commission is suing Musk for making “false and misleading” statements around Musk’s plan to take the company off the stock exchange at $420 per share.

Musk surprised investors when he posted on Twitter in August that he had secured funding to take the company private at $420 per share. He later shared in a blog post that he left a July meeting with the Saudi Arabian sovereign investment fund with “no question” that a deal could be struck. Musk abandoned his plan to go private at the end of August, citing investor concerns that the move would not prove beneficial, but the commission’s new release suggests a potential deal may have contained large caveats.

The document claims that discussions about the idea came up as early as last January:

Beginning in January 2017, Musk had three or four in-person meetings with representatives of a sovereign investment fund (the “Fund”). During these meetings, according to Musk, the lead representative of the Fund expressed a verbal desire to make a large investment in Tesla and establish a Tesla production facility in the Middle East.

The idea came up again during a July 31 meeting:

During the July 31 meeting, the lead Fund representative again raised the prospect of establishing a production facility in the Middle East. According to Musk, he expressed openness but made no commitment; Musk assumed that whether a Tesla production facility in the Middle East was a precondition to the Fund’s willingness to take Tesla private would depend on the amount of capital the Fund was required to commit to the transaction. Musk did not discuss his assumption with the representatives of the Fund.

The prospect of a Middle East factory seems remote, as the document claims at least one member of the board described the idea as a “non-starter.” Tesla operates a number of key facilities: a Fremont, California plant that employs around 10,000 people, a Dutch assembly plant in Tilburg, an under-construction operational battery factory in the Nevada desert dubbed “Gigafactory 1,” and a solar cell factory in Buffalo, New York, dubbed “Gigafactory 2.” Musk has publicly announced plans to build further facilities in Europe, with Musk expressing interest in the German border area with France, and Shanghai, where construction is expected to last two years.

Read the full document below:

Media via Tesla