Strange Bedfellows: Saudi Arabia And Tesla Inc.

-Source-Forbes- Since the beginning of 2017 the managers of Saudi Arabias sovereign wealth fund have approached Elon Musk and his iconoclastic Tesla Inc. (NYSE:TSLA) numerous times in an effort to acquire a stake in the innovative all-electric auto manufacturer. So what does a mammoth petro-state want with a company determined to accelerate the worlds transition to a sustainable energy future" and put Big Oil out of business? The answer to this dialectic is Financial Planning 101: portfolio diversification. Not to mention Prince Mohammed bin Salmans (MBS) love of everything new and shiny. The Kingdom has launched a technological financial political and cultural development program known as Saudi Arabia Vision 2030." One policy goal of the ambitious roadmap is to decouple fossil fuels from the nations identity instead promoting the digitization privatization and decarbonization of the Saudi economy. Unemployment rates remain high especially among Saudi youth which can lead to political and social volatility (remember the Arab Spring of 2010 2011). Vision 2030 aims to accommodate the burgeoning working-age population by growing as-of-yet underdeveloped sectors like tech services and renewable energy. As it stands today 50 of Saudi government revenue comes from oil sales. According to the IMF the Kingdoms fiscal breakeven point per barrel of oil is in the $83 $87 range meaning that todays oil prices are insufficient to meet its budgetary needs. Saudi Arabia has projected a budget deficit of 195 billion riyals ($52 billion) in 2018 or 7.3 of GDP down from 230 billion riyals last year which is unsustainable in the long term. What better way to hedge your portfolio than to bet on the company that wants to make your main asset obsolete?