General Discussion: 2018 Investor Roundtable

[geometro]

1. Well, then not ETF, a shell company instead, like the yahoo shell holding BABA.
2. If it is shell, then there is no redemption. It only delists when tsla going public again.
3. tracking value of the underlying asset is a theoretical thing. If you think it is undervalued/overvalued, feel free to hedge.

Good luck with that.

 

[SPadival]

Is it a leveraged buy out if current shareholders can retain shareholder value in new company by not being “bought out” when converted to a private company?

No. It’s not by any reasonable definition of LBO. This LBO thesis had its genesis on CNBC.

Sometimes I wonder if the talking heads on CNBC educate themselves by watching reruns of “Wall St” (the movie).

 

[avoigt]

I’m fine either way with Tesla, I’ll stay with the private investment if that happens and I’ve bought extra shares in case it does.

There is no way Tesla/Elon could avoid not hurting some longs (options, retirement accounts, foreign investors) but the company decisions can’t be made based on this small minority situation. I was lucky, my option positions were in the 340 range and I exited fairly quickly and bought shares with those funds.

I’ll miss being able to trade the ups and downs of Tesla to acquire more shares and I’ll miss the entertainment, but I sure won’t miss the haters and would love to see them take as much pain as possible on the way out the door.

If the deal falls through for legitimate reasons (not for lack of funding) TSLA May take a short term hit before resuming business as usual. The businsss has not fundamentally changed.

The amount of shareholder international as well as other who may be affected is larger than you may believe and can have a fundamental impact on the voting. So Elon better finds an acceptable solution at least for the larger part of those otherwise there is the threat that the deal is not approved by shareholders.

 

[Oil4AsphaultOnly]

Im sorry, but this 420 price is a serious problem. For one, it caps the stock at 420 from my point of view. The reason is that many funds will have to exit the stock before the deal is completed or wait until the deal is done at sell at 420, they will want to exit at the highest price so every time the stock goes above 420, it makes more sense to sell at that point rather then to wait for the deal to close. This is enough supply to cap the squeeze at just over 420. The deal must happen to force covering, otherwise they just wont cover.

Because the 420 is a cap, the shorts have a known loss that is 10% higher then today's price. They can short at will have almost no downside beyond the 10%. Clearly today's price action shows that shorts could get out at anytime.

Here is the worst part. Because the price is capped at 420, everyone who had long dated calls are crapped out. They are going to 0. As they go to 0, shorts can buy these calls for Squeeze insurance. They have already dropped to 1/4 the value before the stock was halted. What does this mean? If there is a squeeze, shorts can cash in the calls and clean house. If the deal fails to go through, they can also profit from the calls because they will return to normal values. If the stock price collapses because it turns out Elon never had any real funding, then they are going to clean house on the short position. Elon has basically gifted Shorts an out while screwing anyone who was long with calls.

If there is a squeeze, the shorts can sell the calls they bought for pennies on the dollar.

If there is no squeeze and the deal goes through, they can cover and the funds will bail them out.

If there is no deal and the stock stays elevated, then the shorts can add to their short and mop up profits on the calls as they return to normal.

If the SEC finds an issue with the announcements or there is an issue with the funding, shorts will get bailed out by the stock price dropping to 200.

I dont know what Elon was thinking, but this is absolutely terrible for anyone who was long Tesla with options and a complete bailout for shorts smart enough to buy insurance.

I think there's a huge mistake in this assessment, in that all the call options need to be exercised in order to have any shares to return. So revisiting the scenarios ...

if there is a squeeze - the shorts need to exercise their call options in order to limit their losses to whatever the strike price is. 400 Jan 19's are still going for $28 per option, so a short who's holding it will still have paid $428 per share if they exercise. The options don't get into the pennies on the dollar range until you reach strike prices in the 500 and up range.

If there is no squeeze - the shorts will be out the cost of the call option plus the cost to cover their short position. Not a doomsday scenario for the shorts, but collectively, they'll still be out almost $12 Billion.

If there is no deal and the stock stays elevated - yeah, this is probably the worst case scenario for longs, with the shorts getting a chance to profit. Not likely, as we'll know from TMC's collective wisdom whether or not shareholders will support the deal.

If the SEC finds an issue - I don't see this happening, since there was no selective disclosure, and we did get the Saudi Arabia $2 Billion investment that we don't really know the details on that same day.

All in all, yes the shorts have an out, but all they'll get is the chance to have fixed losses, with very little gain.

 

[Sancho]

I think there's a huge mistake in this assessment, in that all the call options need to be exercised in order to have any shares to return. So revisiting the scenarios ...

if there is a squeeze - the shorts need to exercise their call options in order to limit their losses to whatever the strike price is. 400 Jan 19's are still going for $28 per option, so a short who's holding it will still have paid $428 per share if they exercise. The options don't get into the pennies on the dollar range until you reach strike prices in the 500 and up range.

Wait a minute. Yes, a particular bear investor who has sold short can hedge the risk by buying a call, but who is losing out on the wrong side of that call: another bear investor. If the stock price goes to 600 because that’s what is needed to convince enough holders to sell to satisfy short buyers, then collectively short side traders are going to lose...bigly. There is no cap to bear side losses in this game.

 

[SPadival]

• The plan does penalize long options traders. Learn ya to be speculative, no? Those who just own shares aren't especially negatively affected, as they will be able to sell at a profit or keep with hopes of increased value.

It is a bit of a gray area. Do you classify LEAPS holders as traders or investors? There were a few long term investors here on the forum who have discussed "converting" their long-term share holdings into LEAPS on a temporary basis. I am not sure if this risk of going private was discussed. I will have to dig up the relevant thread/post.

Luckily, all of my holdings are in stock, though I do have a couple of small JAN19 LEAPS.

 

[schonelucht]

Yes, a particular bear investor who has sold short can hedge the risk by buying a call, but who is losing out on the wrong side of that call: another bear investor.

Could also someone who is holding those shares long and just wanted to pocket a bit of extra money.

 

[Sancho]

Could also someone who is holding those shares long and just wanted to pocket a bit of extra money.

THAT runs the risk of being the most expensive (in terms of opportunity lost) pocket money in world history. Investment advice: don’t do this.

 

[Runarbt]

The amount of shareholder international as well as other who may be affected is larger than you may believe and can have a fundamental impact on the voting. So Elon better finds an acceptable solution at least for the larger part of those otherwise there is the threat that the deal is not approved by shareholders.

my guess is int. shareholder who cant join the private company from current broker cant vote either. many int. couldnt vote solarcity deal.

so.. That kinda sorts out that issue.

I move my stock to schwab this week, just to be sure everything goes smooth. and that I will be able to vote "Hell Yeah!!". ;-)

 

[avoigt]

my guess is int. shareholder who cant join the private company from current broker cant vote either. many int. couldnt vote solarcity deal.

so.. That kinda sorts out that issue.

I move my stock to schwab this week, just to be sure everything goes smooth. and that I will be able to vote "Hell Yeah!!". ;-)

Allow me to debunk that. I know quite some European Shareholders who did vote and have voting rights. We all do not know what their share is.

Also, moving your shares to the US does not guarantee to be able to execute voting rights. Thats what my bank confirmed to me in writing.

Finally it seems that there is no difference if your shares are located in the US as a European investor versus they are located in Europe in terms of being able to participate at the privatization.

 

[Yggdrasill]

Allow me to debunk that. I know quite some European Shareholders who did vote and have voting rights.

That have european accounts?

 

[avoigt]

That have european accounts?

correct.

 

[Runarbt]

correct.

well, I know many couldnt vote.. so I guess we are both partly correct

 

[Lhan]

Allow me to debunk that. I know quite some European Shareholders who did vote and have voting rights. We all do not know what their share is.

Also, moving your shares to the US does not guarantee to be able to execute voting rights. Thats what my bank confirmed to me in writing.

Finally it seems that there is no difference if your shares are located in the US as a European investor versus they are located in Europe in terms of being able to participate at the privatization.

Do you know which European firm they use ?

 

[gora321]

I just opened my eyes. I have in my mind that Saudis bought 2B stake but I haven't process it before. This can't be friendly right with such oil background. Obviously Tesla reached the level of threat when they should react. I'm pleased with that confirmation.

I think that Elon identified it and that they are much larger threat for the EV future than pussies from wall street and regular FUD. One reason more to support Tesla private and Elon should act fast. I'm guessing that funding will be friendly, very friendly.

I'm not selling. I'm talking about mother Earth which needs us.

 

[Mario Kadastik]

I just opened my eyes. I have in my mind that Saudis bought 2B stake but I haven't process it before. This can't be friendly right with such oil background. Obviously Tesla reached the level of threat when they should react. I'm pleased with that confirmation.

I think that Elon identified it and that they are much larger threat for the EV future than pussies from wall street and regular FUD. One reason more to support Tesla private and Elon should act fast. I'm guessing that funding will be friendly, very friendly.

I'm not selling. I'm talking about mother Earth which needs us.

It can also be that considering that the prince is vegan, drives a Tesla and is planning a huge solar farm, then the fund is starting to diversify into alternative energy products and Tesla is the obvious one. Doesn't have to be hostile takeover. It's kinda like Norway where the big wealth fund is due to oil sales, but they are actually extremely pro green energy and transportation...

 

[replicant]

Do you know which European firm they use ?

I was able to vote on the SCTY merger, and the shares I owned were held in an ordinary securities account (at Boursorama, a French online bank). I just asked the bank for my ballots.

I'm pretty sure most shareholders who couldn't vote have lazy bankers who just don't bother to do their job.

 

[Sean Wagner]

I'll paraphrase a quite succinct comment from one of the Financial Times' readers ["TheLongView"]:
"What Tesla needs right now is not capital in shareholders' hands but into expansion".

Growing effectively and transparently is what will somewhat dim the cacophony.
Going private would encourage the rabid anti-renewables and anti-Tesla band of bothers.

Solid execution to the rescue.

 

[schonelucht]

Pardon me from going elsewhere than the taking private story. But! Tesla was struggling with logistics lately which wasn't able to keep up with increased production. Tesla filled a few overflow lots with vehicles to the point that some were suggesting that there was insufficient demand and this was really a stockpile. Last week, Tesla started to move a significant number of cars away however, presumably out to deliveries. See this youtube channel with a lot of drone fly-overs to judge yourself (If you take delivery in the coming weeks and you find a discarded Carl's Jr wrapper on the backseat, the last video explains that too.)

 

[mongo]

THAT runs the risk of being the most expensive (in terms of opportunity lost) pocket money in world history. Investment advice: don’t do this.

I'm long, and accumulating additional shares above my comfort/ liquidity level before the deal happens. Assuming success, I'll cash those out for either $420 or what my GTCs trigger at. The rest goes into private Tesla.

Other than the possibility of the deal not going through (or taking a long time), it's a win.