Musk took Tesla shareholders and the stock market by surprise on Tuesday by announcing on Twitter he was considering taking the loss-making electric car-maker private at $420 United States a share. The SEC declined to comment.
They said this "included discussion as to how being private could better serve Tesla's long-term interests".
Teresa Goody, a former SEC official, said Musk "did something inappropriate and caused chaos in the market" in a way that would likely draw scrutiny from investigators.
"Given the haphazard process of disclosure last afternoon, our initial impression was that Elon Musk sprung his plan of going private upon the public without consulting Tesla's board of directors or major shareholders", Bernstein analysts said in a note titled "Going private?"
The statement by the board, published by NASDAQ, confirms that the proposal is under serious consideration.
In a letter to shareholders after his tweet on Tuesday, Musk fleshed out his idea, suggesting they would get the option to sell their shares for $420 U.S. each or remain investors in a private Tesla, out of the glare of Wall Street and its need for quarterly results.
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The board members said they were "taking the appropriate next steps" to evaluate the proposal.
It's also unclear how Musk came up with the $420 price.
Two of the potential stumbling blocks to Musk's plan include the stock price premium not being enough to get the existing shareholders on board to support the sale and coming up short on the announced funding to complete the transition.
Musk laid out his reasoning for going private in an email to Tesla employees yesterday, which was subsequently posted on Tesla's website.
At the time of the talks, Tesla was trading at just over $300 a share.
"Basically, I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible".
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China's Tencent Holdings Ltd, which took a 5-percent stake in Tesla past year, could also be a possible partner.
Some on Wall Street shared that view. In his first tweet he said funding was secured but provided no details. The talks are no longer underway, Bloomberg said.
Musk has been under intense pressure this year to turn his money-losing, debt-laden company into a profitable higher-volume manufacturer, a prospect that has sent Tesla's valuation higher than that of GM.
The company is still working its way out of what Musk called "production hell" at its home factory in Fremont, California, where a series of manufacturing challenges delayed the ramp-up of production of its new Model 3 sedan, on which the company's profitability rests. "Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company". Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.
By taking Tesla private, Musk believes that the company will be able to sharpen its long-term focus of revolutionizing an automobile industry dominated by fuel-combustion vehicles without having to cater to investors' fixation on how the business is faring from one quarter to the next.
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