On Tuesday, the firm’s chief executive announced his ambitions on Twitter to take the company private, sending shares in the company soaring by seven percent to $367.25.
The price per share would value Tesla at around £56billion ($72billion), making it one of the biggest deals to take a company private. It is currently valued at £45bn ($58bn).
Mr Musk, who owns 20 percent of Tesla with more than 70 percent owned by individuals and institutional investors, had written on Twitter: “Am considering taking Tesla private at $420. Funding secured.”
But his share valuation has infuriated many investors, with some arguing the company could be worth almost double the proposed figure.
One investor said: “When you are investing on a 10-year timeline you can’t put a single value on something.
«If Tesla does become dominant in autonomous driving or electric vehicles, the value could be three or four times $420.»
Another source with knowledge of several investors’ thinking said: “They are extremely angry at $420. They’re frustrated because they have held on and believe Tesla could be worth as much as $800.”
Elon Musk’s decision to reveal his buyout plans on Twitter has also raised legal concerns with, US regulator the Securities and Exchange Commission (SEC) understood to be investigating whether he breached inventor-protection rules.
The SEC allows companies to use social media outlets to announce important information in compliance with its “fair disclosure” rules, as long as investors are alerted about which social media outlets will be used to disclose such details.
Doug Davison, a lawyer at Linklaters, said: “There are a lot of governance issues.
“If it was a legitimate significant material development, Tesla would be required to file regulatory documents within four days. No one is sure if he has funding secured.”
Two shareholders have already launched legal claims against Mr Musk and Tesla over the tweet.
Salman Isaacs has filed a class action in a federal court in San Francisco, calling the statement “materially misleading”.
The complaint read: “Mr Musk’s statement that he had secured funding was especially material and significantly moved the market.
“Because Mr Musk has not secured financing, and has issued false and materially misleading information into the market, short-sellers of Tesla stock were forced to cover their positions by purchasing shares at artificially inflated prices. All purchasers of Tesla securities were injured as well.”
A claim has also been filed by William Chamberlain, who has alleged that the company’s shares were artificially lifted by the chief executive’s announcement and that SEC rules had been breached.
The legal claims come following questions and doubts around how Mr Musk plans to fund his proposed buyout.
The Financial Times had reported on Tuesday that Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund that is overseen by Crown Prince Mohammed bin Salman, has bought a minority stake in Tesla at just below five percent.
PIF, one of the world’s biggest sovereign wealth funds with £194bn ($250bn) in assets, also has a stake in online taxi company Uber.
But despite its minority stake, two sources familiar with the matter told Reuters that PIF has so far shown no interest in financing Mr Musk’s proposed takeover deal.