Text size Tesla (TSLA) stock shot higher on Tuesday after CEO Elon Musk took to Twitter to reveal that he might take the company private at $420 a share. As of early Wednesday afternoon, Tesla's stock price had only given up a small amount of those gains, as markets continued to digest what Musk's Twitter bombshell could mean. Details remain scant. But we've got answers to your questions about this latest twist in Elon Musk's Tesla saga. Who wins if Tesla goes private? Current shareholders would be one winner, as they’ve already seen Tesla's stock price climb. And if the $420 takeout price actually materializes, they will have notched some swell gains. The most obvious beneficiary, however, would be Musk himself. Musk has spent plenty of his own money buying the company’s stock at prices much lower than the level at which shares are currently trading. And Tesla going private would free management, most importantly the free-wheeling Musk himself, from the restraints imposed on publicly traded companies. He’s far from the first CEO to bemoan the short-sighted, quarter-to-quarter attention span of the market. Who loses if Tesla goes private? The first loser that comes to mind are the short sellers — investors betting against the stock — who have surely felt the squeeze as Tesla enjoyed a pair of double-digit gains in recent weeks. On the other hand, Musk telegraphing what the stock price might be does provide a handy way for them to cap their potential losses—losses that in other cases could be theoretically infinite. But even believers in Tesla could be losers if it does go private. It wasn't too long ago that some were mentioning Tesla as the next Apple (AAPL), and even comparing its cars to iPods. If Tesla goes private, the chances of it earning a $1 trillion valuation, like Apple did last week, go out the window. Musk could end up in the loser column if a deal falls apart, of course. Some have already argued that his unconventional methods, coupled with past sparring with short sellers, could be seen as stock manipulation by regulators. Was Musk's tweet legal? We just don’t know yet. Bears are arguing that Musk has no intention of going private, and that he’s just trying to manipulate the stock to hurt shorts and improve the company’s financial position. There's no evidence that's the case. Still, Former SEC chairman Harvey Pitt called the announcement "extraordinarily unusual," which might be an understatement. The fact that there are even questions about the legality of his moves highlights the unorthodox nature of his tactics, and the need for more details. Now, the Wall Street Journal is reporting that the SEC has reached out to Tesla to find out if Musk's tweet was factual, and why the announcement was made in a tweet and not a regulatory filing. Why is Elon Musk talking about Tesla going private right now? The timing is curious. Tesla's stock price soared after it reported earnings last week, and with a few well placed apologies, made investors forget Musk's bad behavior during the company's previous conference call. Tesla's stock had even gotten an early bump on Tuesday from news that Saudi Arabia's sovereign wealth fund had taken a stake in Musk's company. From a purely stock performance level, Tesla didn't need Musk to say anything. Still, Musk seems frustrated with the baggage of being a public company, and he wouldn't have to answer the continued questions about Tesla’s balance sheet, demand for the Model 3, and the durability of its technological edge if the company were to go private. How much would Tesla be worth if it went private? If we’re going by Musk's Twitter post, then Tesla would go private at a takeout price of $420 a share, almost a 23% premium over Tuesday's closing price — even after the spike that followed Musk's tweets. That would put its enterprise value at about $81 billion, by most calculations. Some argue $420 is too low, while others think that figure is overly aggressive. The funding sources and are still unclear, but it’s worth noting that spikes in Tesla’s stock price have considerably improved its financing position. What other companies have done what Musk wants to do? Few other big public companies have gone private in this way. There is the fairly recent example of Dell, which was taken private in 2013 by founder and substantial stakeholder Michael Dell. But that was a conventional leveraged buyout. The company later went public again as Dell Technologies (DVMT). It's likely Tesla’s takeout would be anything but traditional. What would happen to current shareholders if Tesla goes private? Musk has said he doesn’t want to shut shareholders out of Tesla just because it goes private. "My hope is *all* current investors remain with Tesla even if we’re private," Musk said in one tweet. He said he wants to create a so-called special purpose vehicle, one that would allow for existing shareholders — those who don’t accept the final takeout price — to periodically exchange or sell their shares. But analysts are fairly skeptical of this model, which doesn’t seem to have any precedent among public companies that have gone private. Musk himself plans to retain about a 20% ownership of the company. Will this really happen? It's anyone’s guess. Musk has plenty of motivation to make it happen, but without more facts, no one can say how feasible the deal structure and financing looks. Sign up to Review & Preview, a new daily email from Barron’s. Every evening we’ll review the news that moved markets during the day and look ahead to what it means for your portfolio in the morning.<doc-sep>Tesla CEO Elon Musk stunned investors Tuesday with a string of tweets saying he is considering taking the company private, in what would be the largest deal of its kind. "Am considering taking Tesla private at $420. Funding secured," Musk said in a tweet shortly before 1 p.m. Musk discussed the plans further in a blog post later Tuesday. From there Musk tweeted several times. In responses to questions on Twitter, Musk said he will ensure the prosperity of shareholders "in any scenario." If Tesla went private, current investors could keep their stakes in Tesla through a special fund, or sell their shares at $420, he said. Shares jumped after Musk's first tweet, trading as high as $371.15 before giving back gains. Later the stock was halted for more than an hour. When it reopened shares surged more than 10 percent. Tesla shares were already trading higher on a report of a new stake from the Saudi Arabia sovereign wealth fund. In the past year, the stock has traded as low as $244.59 in April and as high as $389.61 in September. The electric car maker went public in 2010. Its current market value is $61 billion. At a share price of $420, the company would be worth $71.3 billion. Although Musk mentioned funding in his initial tweet, a blog post from Tesla did not include any mention of financing. CNBC also contacted a number of Wall Street banks and none of them was aware of any transaction or had committed to funding a leveraged buyout of Tesla. The Securities and Exchange Commission also declined to comment on the matter. However, companies are allowed to use social media outlets like Facebook and Twitter to announce news, the SEC said in 2013. Musk also said he does not currently have a controlling vote in the company and wouldn't expect a single shareholder to have one if the company were private. He said he had no intention of selling his stake, and he said he would remain as CEO.<doc-sep>Getting out of Tesla at $420 per share might not be a bad thing for retail investors who own the popular stock that has a cult-like following. Indeed, Elon Musk's plan to take Tesla private could force retail investors to decide if they want to stay invested in the electric-car maker if – and it's a big if – the CEO's offer, which was made public in an unorthodox string of Twitter tweets earlier this week, ever happens. Musk, the visionary and often controversial CEO, said he would consider converting Tesla into a private company at a price of $420 a share and that it is his hope that "all shareholders remain." And while there are scant details as to how this corporate transition might be structured and how Main Street investors might be involved, Musk himself tweeted that "shareholders could either sell at 420 or hold shares & go private." Given a choice, investors should "take the 420 and go," advises Rob Arnott, founder and chairman of Research Affiliates, a firm that manages money for big institutional investors. Arnott's call is based on valuation. Tesla, which has reported only two profitable quarters since going public in June 2010, is an overpriced stock, Arnott says, one that he dubs a "micro bubble." "You have to use exceptionally aggressive growth assumptions to justify Tesla's current stock price," he says, adding that investors should be ecstatic that they have a possible "exit strategy" at $420 a share, which is about 20 percent higher than Thursday's close of $352.26 following a 5 percent drop. Tesla went public at $17 a share more than eight years ago. More:Report: SEC examining Elon Musk tweets about taking Tesla private More:Elon Musk creates stir: Tesla could and should go private, CEO says More:Tesla board endorses CEO Elon Musk's stunning plan to consider going private Those that want to stay invested in Tesla if it's taken private must be "committed" investors who believe in a profitable future for the high-profile electric-car maker, as owning a stake in a private company gives people less access to their money than a publicly traded stock that can be bought and sold on a traditional stock exchange such as the Nasdaq, says Kevin Landis, CEO and chief investment officer at Firsthand Funds, a tech-stock focused investment firm. In general, privately run companies only allow investors to access their money one or two times a year. And that limitation is a lot different than being able to call your broker or use a mobile trading app to sell a stock in seconds. "It's like buying a painting or a piece of real estate," Landis says. "You just bought an asset that is not liquid." Musk, however, has also broached the idea of creating a "special purpose fund enabling anyone to stay with Tesla." How that type of investment might work is unclear. Current Tesla price targets at big Wall Street firms such as J.P. Morgan and Morgan Stanley, which are $308 and $291, respectively, are well below where the shares are trading now. JJ Kinahan, chief market strategist at TD Ameritrade, says investors who opt to follow Tesla into the private market would be "taking on a whole new level of risk." A private company, he explains, is not required to file quarterly updates to Wall Street regulators, which makes it much more difficult to "track the company" and get up-to-the-second data on what the company is worth.<doc-sep>
CEO Elon Musk tweets that he is considering taking Tesla private at $420 a share. Tesla (TSLA) - Get Report CEO Elon Musk just dug his heels in even harder on a tweet that's raised legal and ethical concerns, including from a former chairman of the Securities and Exchange Commission. Tesla shares, which were halted for more than an hour, rose more than 11% to over $381 apiece after trading resumed at about 3:45 p.m.. Musk tweeted: "Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote." Just before that tweet, there was this: "Def no forced sales. Hope all shareholders remain. Will be way smoother & less disruptive as a private company. Ends negative propaganda from shorts," Musk tweeted Tuesday afternoon. This seems to be a strong implication that maybe Tesla is actually exploring a sale that would take the electric car company private. Tesla has not made any official announcement on a sale whatsoever. Those two tweets came hours after the initial tweet, which read as follows: "Am considering taking Tesla private at $420. Funding secured." The stock rallied as much as 8% on that tweet, as a $420 per share valuation would be a huge premium over the current share price. But trading was halted at around 2:10 Tuesday, making the closing price $366.94, a 7% intraday gain, because the tweets raise a legal concern. Former SEC Chairman Harvey Pitt told TheStreet in a telephone interview just after the tweet that if the purpose of the tweet was to boost the share price, and it was untrue, that is considered securities fraud. "What occurred here is highly unusual," Pitt said. "If this were solely an effort to artificially move the price of the stock, it would be manipulative. And if the claims [in the Tweet] aren't true, it would be fraud." Musk sent a letter to all employees addressing the issue . In the letter he said, "a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best." Musk had a series of tweets after the initial tweet, and before the latest. Here are those tweets: "Am super appreciative of Tesla shareholders. Will ensure their prosperity in any scenario," he wrote. Musk was asked whether he would retain control over the company if it were taken private and tweeted his response. Tesla is one of the most shorted stocks on the market and Musk has used Twitter as his instrument to taunt shorts in the past. Musk has repeatedly said that Tesla will not need to raise capital this year in spite of the fact that the company still isn't profitable. Tesla's shares have risen almost 25% over the past five sessions following the company's earnings release on Aug. 1. Earlier Tuesday it was reported that Saudi Arabia's sovereign wealth fund had built an undisclosed stake in the electric vehicle maker, with the Financial Times estimating the stake at between 3% and 5%. Emails to Tesla about the validity of Musk's comments were not immediately returned. Read more on Tesla's future from TheStreet.