Elon Musk still hasn't made a formal proposal to take Tesla private, an idea he floated over a week ago in a series of tweets he has since attempted to clarify.
Many questions remain about his plan, chief among them how he would pull off taking private a $60 billion publicly traded company.
Lawyers and advisors tell CNBC it's not going to be as simple as "going dark," as smaller companies have done in a big wave in the decade since the financial crisis. That task may become even harder, complicated by regulators reportedly probing his tweets, and a sharp drop in Tesla's stock after a widely circulated interview showed Musk under increasing emotional duress.
In order to pull that off, a company has to have fewer than 300 shareholders (or 500 in some cases). The process involves filing a few forms with the Securities and Exchange Commissionand removing the shares from the exchange where they were listed.
It has been an escape for hundreds of companies over the last decade that found themselves crippled by the pressures of having to meet rigorous public financial disclosure requirements. But Tesla is a big company, and removing itself from the public market is a lot more complicated.
"No one has done it on this large a scale," said Peter Bible, chief risk officer of EisnerAmper and a former chief accounting officer of General Motors.
Usually, the investing public waits impatiently for the next hot initial public offering, but Silicon Valley's tech elite has been disappointing those expectations lately. Many are content to stay private. CB Insights counts 260 $1 billion-plus "unicorns" with a combined private valuation of $840 billion. Last year, there were 160 IPOs versus 486 in 1999 at the height of the dot-com frenzy, according to Statista.
Constant pressure from shareholders and analysts about near-term performance was enough to drive companies like Dell and Tibco to move in the opposite direction and go private, but through the traditional buyout route where shareholders are cashed out.
Tibco, a business intelligence software maker, delisted from Nasdaq in 2014 and went private through a $4.3 billion deal with Vista Equity Partners. "Private provides you with the leeway you don't have in a public setting," its chief technology officer told Britain's CIO magazine at the time.
Tesla debuted on the Nasdaq in 2010, raising $226 million as its shares jumped 41 percent on their first day of trading, and it has returned to the market several times since then issuing more shares. Musk's personal stake in the company has risen in value from $512 million at the time of the IPO to $12.8 billion.
But the electric car company's founder and CEO has complained that being publicly traded invites distracting focus on short-term financial goals and makes Tesla the target of traders who attack the company in order to profit from a decline in its shares.
Simply going dark is a multistep process. The exchanges need several days notice of the plan, and the public has to be informed at the same time. Then forms are filed with the SEC, one to notify it of the delisting and another to deregister the shares if the company has 300 or fewer shareholders. But if the shareholders aren't bought out with cash, the shares continue to trade, moving over to the more thinly traded over-the-counter market.
Going private requires cash to buy out the minority shareholders, usually through a merger, tender offer or reverse stock split.
But Musk's proposal adds a complicating factor.
He has said he wants to preserve a broad ownership of Tesla as a private company. That might be impossible for the mom and pop investors in the stock now who don't qualify to invest in private companies as accredited investors. If they want to keep their ownership, it might have to be through a special purpose fund, something Musk has mentioned.
And that special purpose fund might have to be publicly traded, Morningstar's David Whiston said.
"Issues around regulatory approval come to mind because it is unclear how Tesla will allow retail investors who are not accredited investors to own stakes in a private Tesla," he wrote in a note this week. "That issue is why we think the special-purpose vehicle Musk pointed to in the Aug. 7 email may have to be publicly traded."
Tesla said Tuesday its board has set up a special committee to examine Musk's idea. Lawyers for the committee and the company have been hired, and Musk has tweeted that he has his own advisors, including the private equity firm Silver Lake, which is said to be interested in a possible investment.
The special board committee, including directors Brad Buss, Robyn Denholm and Linda Johnson Rice, hadn't reached any conclusions about "the advisability or feasibility" of a transaction and that it could consider alternatives, Tesla said Tuesday. Shareholders would also have to vote on a transaction, lawyers and advisors said.
That's another complicating factor, lawyers said. There's no guarantee that enough shareholders will agree or that enough will want to sell their shares at Musk's suggested $420 price to get Tesla's shareholder count low enough to deregister the shares. Whiston estimates about 40 percent of the shareholders might take the money, and that would cost about $28.7 billion.
Depending on state law, he'd have to get a super majority of shareholders (in Delaware, it's 90 percent) to be able to squeeze out any holdouts, lawyers said. But Musk has said there will be no forced sales.
Its biggest investors, aside from Musk himself, are mutual funds and money managers in addition to China's Tencent and Saudi Arabia's sovereign wealth fund. Collectively this group holds about 66 percent of the shares. About 17 percent are owned by investors who are too small (either in the amount of Tesla they own or the size of their portfolios) to have to report their stakes. Musk has said he believes two-thirds of Tesla's shareholders will stick with it as a private company.
The deal could turn out to be as unique as the collection of space transportation, electric automobile, high-speed transportation and solar power generation projects Musk has cobbled together in his business empire.
"There is a recipe for going private, but like everything else, Elon Musk does it his own way," said Barry Genkin, a partner at law firm Blank Rome. "He hasn't put any meat on the bones and everyone is scratching their heads about what he means."