It zoomed as high as $371 per share before trading was halted at $367 per share just after 2 pm EDT.
In his typically unorthodox fashion, the eccentric Mr Musk dropped his bombshell on his Twitter account, which he has used as a platform for pranks, vitriol and now for a proposal to pull off one of the biggest buyouts in United States history.
Trading in Tesla was halted at 2:08 p.m. ETpending the release of news.
Tesla has a market value of $58 billion (€50 billion) as of Monday's close, and Musk himself owns almost 20 percent of the company.
Meanwhile, Tesla has announced plans to build a factory in Shanghai, China, and another in Europe, but details are scarce and funding unknown.
"Am considering taking Tesla private at $420".
Also on August 7, the Financial Times reported that the Public Investment Fund, Saudi Arabia's sovereign wealth fund, had built a $2 billion stake in the electric-car maker this year.
After Musk, the next largest shareholders in Tesla are the mutual fund giants T. Rowe Price and Fidelity, with stakes of more than 9% and 8%, respectively, according to Thomas Reuters Eikon.
VideoJamie Albertine, Consumer Edge Research senior automotive analyst, discusses Tesla Inc.
TESLA CEO Elon Musk has laid out his rationale for possibly taking the company private, saying the move would free the electric auto maker to focus on long-term goals, rather than the quarterly concerns of Wall Street.
Meghan and Harry attend friend's wedding on her 37th birthday
Meanwhile, Meghan herself is reportedly celebrating the day by attending a wedding with Prince Harry, who's acting as best man. While there, she suffered the most minor of wardrobe malfunctions, which naturally drove Twitter into an immediate frenzy.
No stranger to controversy, Musk last month apologized for calling British caver Vernon Unsworth, who helped rescue 12 Thai boys from a cave a "pedo", short for pedophile, after Unsworth spoke dismissively of the Tesla chief's proposal for bringing the boys to safety. That baseless tweet was quickly deleted and Mr Musk apologised to the diver. At market close, Tesla's market cap stood at $63.87 billion. Although it's unusual for a chief executive to make such a major announcement over social media, it does not appear to be improper.
Betting against Elon Musk has never been for the faint of heart. "This is not how you do it and it makes you wonder how seriously to take it", said Erik Gordon, a business and law professor at the University of MI. He said is considering taking the company private at $420 a share and already has secured funding.
Camera IconTesla's existing shareholders could be given the option of retaining a stake in the company through a special fund. Musk has a solution to that - take Tesla private.
Making money has proven elusive for Tesla while it has been investing in electric auto technology and ramping up production of its vehicles, including a sedan with a starting price of $US35,000 to appeal to a broader audience.
Musk was clear in his email that a final decision has not been made, and, come to think of it, it's not even clear if this move would be possible.
After first issuing a tweet that he was mulling the idea of taking Tesla private, Musk on Tuesday said in a letter to employees that he would prefer to run Tesla as a private company to allow it to operate away from the attention it receives due to its notoriously volatile stock price.
Musk said that he expects Tesla to eventually return to being a public company. By going private, Tesla will lose that convenient source of financing, something that could cause massive headaches if the company continues to burn through cash as much as it has in recent years, Mr Ramsey said. What do his latest tweets mean for the future of Tesla? Musk has complained repeatedly about short-sellers, who profit when Tesla stock drops.
In his letter, Musk suggested a choice for shareholders of selling their shares for $420 each or remaining investors in a private Tesla. Here are a few things he gains by taking Tesla private.
"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", he said.
"Being forced to sell at $420 in a go-private deal would be a little bit of a bummer because, although myself and all the other Tesla investors would make money at an all-time high, we'd be missing out on a long-term ride", Russell said.