Tags: tesla | saudi arabia | elon musk | invest | ft

FT: Saudi Arabia's PIF Slashes Exposure to Tesla

tesla corporate logo symbol emblem
Ricochet69dreamstime_s_90188677-crop.jpg

Monday, 28 January 2019 01:30 PM

Saudi Arabia's Public Investment Fund (PIF) has slashed its exposure to Tesla Inc., the Financial Times reported on Monday, citing people with direct knowledge of the matter, sending the electric car maker's shares down 2 percent.

The sovereign fund, with help from JPMorgan Chase, hedged most of its 4.9 percent stake in Tesla after the market closed on Jan. 17, FT reported

On Jan. 18, Tesla said it would cut thousands of jobs to rein in costs as it plans to increase production of lower-priced versions of its crucial Model 3 sedan, sending its shares (TSLA) down as much as 10 percent.

As part of the hedging program, PIF will still hold the shares but with little exposure to the stock's movements, according to the report.

The derivative used to put on the hedge is known as an equity collar, which are bespoke instruments that are costly to finance and have become popular with Middle Eastern and Asian investors, the newspaper said.

Tesla declined to comment, while PIF could not be immediately reached for a comment.

Tesla Chief Executive Officer Elon Musk said in August that the PIF had expressed support for a $72 billion deal to take the company private.

The U.S. Securities and Exchange Commission in its suit, however, had said that the meeting between Musk and the fund "lacked discussion of even the most fundamental terms of a proposed going private transaction." 

Meanwhile, Wall Street analysts expect Tesla to forecast a loss for the first quarter when it reports results on Wednesday, having changed their expectations for a profit after warned of a “very difficult” road ahead.

On Jan. 18, Musk also forecast a profit for the fourth quarter, albeit down from the third quarter’s $311.5 million.

The analyst consensus on Jan. 21 turned to a loss for the first quarter and stands at $2.5 million. Analysts on average were expecting Tesla to post a profit of $62.80 million on a reported basis as of Jan. 17, according to Refinitiv data.

“One potential rationale for the company guiding to a loss in March is the timing of vehicles in transit to Europe and Asia,” said Gene Munster from Loup Ventures in a note on Jan. 24.

The company has said it would begin delivering Model 3s to Europe and China in February.

Musk’s dependency on “luck” to be barely profitable while selling its long-range Model 3 to Europe and China and the mid-range Model 3 in the U.S. calls into question the company’s ability to make profits when it finally starts selling its long-promised $35,000 vehicle, analysts said.

Since unveiling the Model 3 three years earlier, Tesla has faced hurdles ranging from production hassles to logistics problems along with a cash crunch and self-inflicted wounds by Musk’s erratic behavior.

While the production of Model 3s are going steady at over 5,000 per week, analysts expect Tesla to face tougher competition from lower priced offerings from Jaguar and Audi, and a reduction of electric car tax credits.

After the federal tax cut came into effect from Jan. 1, Tesla was forced to lower the price of Model 3s by as much as $2,000. That decision is likely to eat into Tesla’s thin profit margins in the first quarter.

At least six brokerages have cut their price targets and two have downgraded the stock to “sell”‘ or equivalent this month, after Tesla’s fourth-quarter Model 3 deliveries fell short of expectations.

U.S. tax cut has little impact on firms' investments

Shares of Tesla (TSLA) have fallen nearly 14 percent since the job cuts announcement on Jan. 18. They were down 3.1 percent at $287.85 on Monday.

The company is set to report its fourth quarter results on Jan. 30.

© 2019 Thomson/Reuters. All rights reserved.

   
1Like our page
2Share
StreetTalk
Saudi Arabia's Public Investment Fund (PIF) has slashed its exposure to Tesla Inc., the Financial Times reported on Monday, citing people with direct knowledge of the matter, sending the electric car maker's shares down 2 percent.
tesla, saudi arabia, elon musk, invest, ft
619
2019-30-28
Monday, 28 January 2019 01:30 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved