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Tesla's board has confirmed that it will consider the proposal by chief executive Elon Musk to take it private.
A statement was issued by six members of the electric carmaker's board after Mr Musk tweeted to say he had the funding to de-list the company.
The board had "met several times over the last week" to discuss going private, the statement said.
They said this "included discussion as to how being private could better serve Tesla's long-term interests".
Mr Musk said in his tweet on Tuesday that shareholders would be offered $420 (£326) per share, valuing the business at more than $70bn.
This would make it the biggest deal of its kind, surpassing the purchase of utility TXU Corp in 2007 for $44bn by a consortium.
The brief statement by six of the nine board directors said Mr Musk had "opened a discussion with the board" about taking the company private last week.
The discussions "addressed the funding for this to occur", the six directors added. They did not include Mr Musk, his brother Kimbal Musk, and Steve Jurvetson, a venture capitalist.
'Irregular' announcement
The board statement came amid questions about how Mr Musk opted to disclose the possible de-listing with investors.
While companies are allowed to make announcements via social media, typically they also make a simultaneous regulatory filing, said Andrew M Calamari, a partner at the law firm Finn Dixon & Herling and former director of the New York office of the Securities and Exchange Commission, the US market regulator.
"Just in terms of the style of this, it strikes me as very irregular," Mr Calamari said.
"It also raises questions about his intent," he added. "Was he in earnest in what he's saying, or does he have some other motive" like influencing the stock price.
Tesla shares reached a peak of $368 after Mr Musk's tweets on Tuesday, before trading on the stock market was halted.
Trades resumed later that afternoon, after the company published an email from Mr Musk to employees elaborating on the plans.
Tesla shares surged close to their all-time high of $385, which they touched almost a year ago, but fluctuated on Wednesday after the board members issued their statement.
'Wild swings'
In the staff memo, Mr Musk explained why he wanted to take the company private.
"As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders," he wrote.
"Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long term," he wrote.
He added that the company was "the most shorted stock in the history of the stock market" - a trading strategy which assumes share prices will fall - so "being public means that there are large numbers of people who have the incentive to attack the company".
Those traders are likely to have lost money when the share price rose on the announcement about a delisting.
Questions continue
Mr Musk already owns 20% of the company. He said his intention in taking the company private was not to increase his personal holding and his plan would give existing investors the option to retain their shares.
Regulators are likely to be interested in what evidence exists - such as agreements with investors or banks - for Mr Musk's claim that funding was "secured", Mr Calamari said.
The structure of the deal also remains ambiguous, said Adam C Pritchard, professor of securities law at the University of Michigan.
If more than 2,000 investors opt to retain their shares, then the firm would be subject to the disclosure rules of a public company, he added.
"Intuitively it doesn't make sense because it would still be a public entity, and the public entity status is what is apparently objectionable to Musk," Mr Pritchard said.
Steven Kaplan, a University of Chicago professor who researches private equity, said it would be difficult for Mr Musk to raise the necessary finance when Tesla has still not made a profit.
"The company is cash-flow negative. How do you use any debt on a company that is cash-flow negative?" he said.
Elon Musk shocked Wall Street and Silicon Valley when he tweeted Tuesday that he wanted to take Tesla private.
But can Musk really strike a deal? And what would it mean to Tesla shareholders if he succeeds?
Musk said in a series of tweets that he had the funding and investor support.
"Only reason why this is not certain is that it's contingent on a shareholder vote," Musk said in one tweet.
But it may not be that simple.
How would Tesla go private?
It would have to buy back all of its public shares.
Musk proposed an offer of $420 per share for Tesla (TSLA), or about 12% higher than where Tesla's stock was trading late Wednesday morning. That would value the company at more than $70 billion.
Musk is Tesla's biggest shareholder, with a nearly 20% stake.
It's unclear who Musk secured funding from. The Financial Times reported that he met with Saudi Investors, but the company has not commented. Typically investment banks provide the huge amount of capital to take a company private. But that comes with substantial risk -- and adds a huge amount of debt to a company's balance sheet.
The next three largest shareholders -- investment firms T. Rowe Price, Fidelity and Baillie Gifford -- have a combined 25% stake. None of those firms would comment about Musk's proposal, but it's not clear that every investor would be on board. If those shareholders vote against the proposal the company would not go private.
Musk also said that shareholders would have the option of selling their stakes or retaining their shares for partial ownership of a privately held Tesla.
So that's led to confusion about how "private" Tesla would be if it kept some of its existing investors.
Tesla's board said in a statement Wednesday that Musk talked to board members last week about why going private would make sense and how a deal could be funded. The board said it is now taking the "appropriate next steps" to evaluate the proposal.
Will investors stick with a private Tesla?
One Tesla shareholder said he thought a deal to take Tesla private was doable.
Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, which owns 38,000 shares of Tesla, told CNNMoney he would hang on to his investment even if Tesla went private because he believes in its growth potential.
Gerber noted that Musk's startup SpaceX is private, and investors -- including mutual fund Fidelity -- are given the chance every few months to cash out.
"The structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months," Musk said in an email to employees Tuesday that was published on Tesla's corporate blog.
Will going private solve Tesla's problems?
Not necessarily.
The company has $2.2 billion in cash and $9.5 billion in debt.
If Tesla adds to its debt load to finance a buyout, rising interest rates could make it more expensive for Tesla to make payments.
"The company can't afford more debt," Gerber said.
Tesla could raise funds by issuing more stock, but that would dilute the company even more and make it harder to go private.
The company also remains unprofitable and going private wouldn't change that.
It would just allow Musk to make more investments in the company without having to worry about short-term focused investors clamoring for profits sooner rather than later.
Is a deal smart given changes in tax law?
That's debatable. The new tax rules enacted by Congress last year could be bad news for Tesla.
The IRS now caps how much a company can deduct on interest payments for corporate debt. That's a key reason why Michael Dell decided to list shares of Dell Technologies (DVMT) on Wall Street again after taking the company private in 2013.
Nonetheless, Gerber said that he understands why Musk wants to take Tesla private.
So why does Musk still want to do this?
Musk seems tired of dealing with skeptical Wall Street analysts and short sellers who are trying to profit from declines in the stock.
One person on Twitter even mentioned Dell going private as a model for Tesla. A user named Evoto Rentals wrote "Been saying this all along. Just like Dell did. It saves a lot of headaches."
Musk responded to that tweet with a simple, "Yes."
If Tesla were private, short sellers would no longer have a way to make money from negative Tesla headlines. And Musk would not have to hold quarterly earnings calls and deal with questions from analysts that he finds tedious.
Musk would have a lot more freedom to invest even more in solar roofs, the Tesla Semi truck and any other new products without having to incur the wrath of investors and analysts who question the strategy.
Is $420 high enough of a price to take Tesla private?
Perhaps not. Other Tesla bulls have said in the past they have no interest in selling anytime soon.
Money manager Ron Baron told CNBC in May that "we're going to make 20 times our money because the opportunity is so enormous" for Tesla.
Baron's firm -- Baron Capital -- owns nearly 1.7 million shares of Tesla, the 13th largest stake. Baron declined to comment to CNNMoney when asked specifically about Musk's proposal to take Tesla private.
And Gerber said he personally would rather have Tesla remain public because he thinks the stock could go much higher than $420. But even he has a price at wihch he'd cash in.
"If Musk wants to go private at $570, I would sell my stock," he said. "I would be happy and buy a new house."
Image copyright Getty Images
Tesla's board has confirmed that it will consider the proposal by chief executive Elon Musk to take it private.
A statement was issued by six members of the electric carmaker's board after Mr Musk tweeted to say he had the funding to de-list the company.
The board had "met several times over the last week" to discuss going private, the statement said.
They said this "included discussion as to how being private could better serve Tesla's long-term interests".
Mr Musk said in his tweet on Tuesday that shareholders would be offered $420 (£326) per share, valuing the business at more than $70bn.
This would make it the biggest deal of its kind, surpassing the purchase of utility TXU Corp in 2007 for $44bn by a consortium.
The brief statement by six of the nine board directors said Mr Musk had "opened a discussion with the board" about taking the company private last week.
The discussions "addressed the funding for this to occur", the six directors added. They did not include Mr Musk, his brother Kimbal Musk, and Steve Jurvetson, a venture capitalist.
'Irregular' announcement
The board statement came amid questions about how Mr Musk opted to disclose the possible de-listing to investors.
While companies are allowed to make announcements via social media, typically they also make a simultaneous regulatory filing, said Andrew M Calamari, a partner at the law firm Finn Dixon & Herling and former director of the New York office of the Securities and Exchange Commission, the US market regulator.
"Just in terms of the style of this, it strikes me as very irregular," Mr Calamari said.
"It also raises questions about his intent," he added. "Was he in earnest in what he's saying, or does he have some other motive" like influencing the stock price.
Tesla shares reached a peak of $368 after Mr Musk's tweets on Tuesday, before trading on the stock market was halted.
Trades resumed later that afternoon, after the company published an email from Mr Musk to employees elaborating on the plans.
Tesla shares surged close to their all-time high of $385, which they touched almost a year ago, but fluctuated on Wednesday after the board members issued their statement.
'Wild swings'
In the staff memo, Mr Musk explained why he wanted to take the company private.
"As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders," he wrote.
"Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long term," he wrote.
He added that the company was "the most shorted stock in the history of the stock market" - a trading strategy which assumes share prices will fall - so "being public means that there are large numbers of people who have the incentive to attack the company".
Those traders are likely to have lost money when the share price rose on the announcement about a delisting.
Questions continue
Mr Musk already owns 20% of the company. He said his intention in taking the company private was not to increase his personal holding and his plan would give existing investors the option to retain their shares.
Regulators are likely to be interested in what evidence exists - such as agreements with investors or banks - for Mr Musk's claim that funding was "secured", Mr Calamari said.
The Securities and Exchange Commission, the US market regulator, has inquired about the issue, the Wall Street Journal reported.
The structure of the deal also remains ambiguous, said Adam C Pritchard, professor of securities law at the University of Michigan.
If more than 2,000 investors opt to retain their shares, then the firm would be subject to the disclosure rules of a public company, he added.
"Intuitively it doesn't make sense because it would still be a public entity, and the public entity status is what is apparently objectionable to Musk," Mr Pritchard said.
Steven Kaplan, a University of Chicago professor who researches private equity, said it would be difficult for Mr Musk to raise the necessary finance when Tesla has still not made a profit.
"The company is cash-flow negative. How do you use any debt on a company that is cash-flow negative?" he said.
Initially, it wasn't clear if the CEO's proclamation was in jest — "420" is a popular code endorsing cannabis consumption. But Musk was dead serious.
In fact, Musk has signaled his wish to privatize the electric vehicle maker before. For example, he told Rolling Stone in November 2017, "It actually makes us less efficient to be a public company." But Musk delivered his informal proposal on Tuesday seemingly out of the blue.
By Tuesday afternoon, Musk made a more formal statement about privatizing Tesla in a company blog post.
There are several reasons why Musk might want to go private:
Keep competitive information secret: As a privately held company, Tesla would not have to disclose information that could give competitors an edge.
By contrast, Tesla now makes quarterly disclosures about debt levels, personnel changes, executive compensation, how many cars are being produced and delivered, various lawsuits the company is facing, recent personnel changes, and its views of risks and competitors.
Align with long-term shareholder interests: As Musk alluded to in his letter, owners of privately-held companies can maintain control over every operational decision without running afoul of shareholders' quarterly expectations.
He wrote that being public "puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term."
Loup Ventures' Gene Munster gave CNBC similar reasons why Tesla might want to be private:
