The step would remove the public spotlight from the company, which has been burning through cash and struggling to meet production targets. It also suggests Musk feels constrained running Tesla as a public company and would prefer to manage it more on his own terms.
"First, 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 said in the post.
Tesla is subject to "wild swings" in its share price, and relentless criticism from short sellers, which are a major distraction for Tesla employees, Musk said. Tesla is one of the most heavily shorted public companies.
Being public also requires Tesla to publicly report quarterly earnings, and 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 said.
Musk added in a tweet that investor support for the plan "is confirmed," and that the only reason the decision is not certain yet is that it would be contingent on a shareholder vote.
Tesla shares closed Tuesday up more than 10 percent. Volume was unusually robust — more than 3 times Tesla's average daily volume of 8.85 million, with more than 29.8 million shares trading. Before Musk mentioned the buyout, Tesla shares were already trading higher on a report of a new stake from the Saudi Arabia sovereign wealth fund.
After a series of tweets Musk sent out, the stock was halted for more than an hour.
It began with a tweet just before 1 p.m. Tuesday afternoon. "Am considering taking Tesla private at $420. Funding secured."
But the plan Musk laid out did not mention anything about that funding, which would total about $71 billion if Musk plans to take Tesla private at $420 a share. Its current market value is $64 billion.
A deal of that size would dwarf the previous largest leveraged buyout, TXU, which was valued at $32.11 billion, excluding debt.
It is a guessing game as to who would fund such a transaction. CNBC contacted a number of Wall Street banks and none of them was aware of any deal or had committed to funding a leveraged buyout of Tesla.
"We are surprised by his claim of financing secured, even as the FT reports the Saudi Arabia Public Investment Fund took a stake in TSLA," said CFRA analyst Efraim Levy in a note Tuesday.
Musk said on Twitter that shareholders would be able to either sell their shares at $420 or remain invested in Tesla through a special purpose fund, as he has set up for investors in SpaceX, his privately-held commercial space firm. Investors would be limited to buying and selling stock once every six months, though. Musk said in the post he has no intention of merging the two companies, which have been known to share resources and collaborate in the past.
Some have questioned the unorthodox nature of how Musk chose to reveal his intentions. But the Securities and Exchange Commission declined to comment on the matter.
In the past year, Tesla shares have traded as low as $244.59 in April and as high as $389.61 in September.
Tesla went public in 2010. Since then the company has returned to markets several times seeking additional capital to fund its growth and Musk's ever-expanding vision. Like many Silicon Valley companies, Tesla's share price has been volatile, but has risen more than 2,000 percent since its IPO.
Musk has at times chafed against criticism, or even pointed questions about Tesla. He has called out journalists on Twitter and dismissed questions from analysts on earnings calls.
But Musk continues to set ambitious goals. Musk recently said he expects Tesla to begin being profitable in the third quarter of 2018, despite skepticism from many on Wall Street.
The full blog post reads as follows:
August 7, 2018
The following email was sent to Tesla employees today:
Earlier today, I announced that I'm considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.
First, 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. 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. 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. 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.
I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we're all trying to achieve.
This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. This is not to say that it will make sense for Tesla to be private over the long-term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.
Here's what I envision being private would mean for all shareholders, including all of our employees.
First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium.
Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.
Third, the intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. However, 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.
Finally, this has nothing to do with accumulating control for myself. I own about 20% of the company now, and I don't envision that being substantially different after any deal is completed.
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.
This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we'll keep fighting to achieve our mission.
-- CNBC's Alex Sherman contributed to this story.