Elon Musk has scrapped his bid to take Tesla private, saying shareholders had told him the company would be better off on the public market.
Over the weekend Mr Musk announced he was abandoning his plan to attempt to take the electric car company off the stock market with the backing of the Saudi Arabian sovereign wealth fund.
When he made the announcement, Mr Musk said 65 per cent of the shareholders would back his plan and continue to own the shares as an unquoted investment.
But many mutual funds are forbidden from owning unquoted investments, which particularly applies to passive funds which are permitted only to own shares listed on the specific market they track.
Mr Musk appears to concede the structure he had in mind to allow many mutual funds to continue to own the shares was so complicated it would not be accepted by regulators.
He added: "There is also no proven path for most retail investors to own shares if we were private. Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was 'please don’t do this'."
James Anderson, who jointly runs Baillie Gifford's £7bn Scottish Mortgage investment trust, has been invested in Tesla since the shares were closer to $50 (£38) than the current $319 (£247) and is the fourth largest investor in the company.
He said the $420 (£325) a share valuation was probably too cheap, given the potential for the company to become a market leader.
Some of the funds operated by Baillie Gifford, though not Scottish Mortgage, would have been unable to keep a stake in Tesla if it were to go private but Mr Anderson also objected to the price at which Mr Musk proposed to take the company private.
Mr Anderson had previously said Tesla is the share about which investors in his high-performing trust have the most questions.
Crispin Odey, a hedge fund manager who has taken a short position in Tesla, meaning his clients profit if the shares fall in value, said in a letter to investors he felt Tesla was "entering the final stage of its life".