If you've been following the coverage surrounding Tesla's stock price in recent days, you know there's been plenty of talk around it getting close to a magical $420 share price. But why that's so magical might surprise you.

Of course, any rise and fall in Tesla's stock price matters. But last year, Tesla chief Elon Musk made it far more important when he announced he wanted to take the company private at $420 a share. At the time, he said that he had secured funding at that price and could take Tesla private.

The announcement, which was shared in a tweet on his highly influential Twitter page, captured plenty of attention. And although he eventually needed to settle a dispute with the SEC over it and promise not to reveal anything that could materially impact his company's shares on Twitter again, the deal didn't happen. And Tesla is still public.

But since then, industry observers have spent considerable time and energy watching Tesla's share price to see if it could ever get to the $420 share price Musk had floated. And earlier this week, when it topped $400, all eyes were on Tesla. Even more eyes were on Tesla yesterday when the shares briefly hit a high of $413, before they came back down.

So close, yet so far.

But the story behind the $420 figure is even more interesting when you consider two very different stories on how Musk settled on it.

For his part, Musk told reporters at the time that he had been in discussions with Saudi Arabia's sovereign wealth fund, and after those conversations, believed that at $420, he could get enough from that fund to take the company private. That ultimately didn't happen.

But in a strange twist, CNBC reported last year that the SEC believed Musk's $420 price target had to do in some way to marijuana.

"We allege that Musk had arrived at the price of $420 by assuming a 20 percent premium of what Tesla's then existing share price (was), and then rounding up to $420 because of the significance of that number in marijuana culture, and his belief that his girlfriend would be amused by it," the SEC's co-director of enforcement Steven Peikin said last year, according to CNBC

Of course, Musk never confirmed that's the case and little has been said about the price target since. He did, however, cause some trouble last year, when he was interviewed on comedian Joe Rogan's podcast and smoked marijuana with the host.

Either way, $420 has become an important symbolic stock price for Tesla. And shares are down today as they inch further away from the $420 mark, there seems to be a good chance that eventually, Tesla's stock will hit that high.

Published on: Dec 20, 2019
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