Saudi Arabia reduces exposure to Tesla stock, hedges its stake


Saudi Arabia has cut its financial exposure to Tesla stock by hedging the government’s stake in the electric car maker’s company. According to an FT report, Saudi Public Investment Fund [PIF] hedged most of its 4.9% stake in Tesla with the help of bankers at JPMorgan Chase. Saudi government’s 4.9% stake makes it a major shareholder of the company.

Following the hedging of the stake by the Saudi government on January 17, Tesla announced that the company is downsizing and added that “difficult times” were ahead which led to a fall in Tesla stock prices.

Saudi Arabia has taken out an insurance policy on its Tesla shares which decreases the government’s net exposure to the stock. Four months before the Tesla CEO, Elon Musk said that the Saudi government was ready to back the electric car company to go private for $420 per share. In a tweet, Musk said that he had already secured the funding.

The SEC debunked his claims and called it false and misleading. Musk was charged with fraud by the SEC. He was made to step down as the Tesla CEO and appoint new board members. Musk also had to pay a personal fine of $20 million.

The PIF seeks to invest in major tech startups under the supervision of Crown Prince Mohammed bin Salman. The Crown Prince’s investment in the electric carmaker is to diversify the nation’s economy and holdings as the country’s primary revenue come from oil exports.

The government has also placed an equity collar on the hedge to protect it from random price swings. This will help the government obtain profits without selling shares. It will also enable the government to sway the company’s decisions without being subjected to price fluctuations.

Image via Shutterstock

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