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Mmm, not so sure. Basically the question is whether there are a stockholders owning a lot of stock who both (a) think the stock is worth significantly more than the buyout price, and (b) aren't able to follow the company into private status for whatever legal reason. If there are, there would be objections and lawsuits and basically he'd have to raise the price to appease enough of them to reduce it to a small number. There would probably still be lawsuits. And if Tesla does really well, some of them would win (if you say "I was forced to sell at $420 due to the delisting, I knew Tesla would be worth $2000 next year, and the appraisal for the liquidity event says I was right", you have a bit of a case), but as long as it wasn't a large number, the payouts wouldn't be material. If it was a large number, the payouts would be material.
I hope Musk really has figured out a way to let *every* stockholder stay in private equity, but I just can't imagine how. If he does figure it out this will be one complicated deal, with endless footnotes. More likely he'll figure out how to handle maybe 90%+ of stockholders but not all.
He hasn't put TSLA in play. That would only happen if he was squeezing out existing shareholders. He isn't. Everyone can stay in. He might need very little money to take out the few shareholders who think 420 is a high price. If Apple offers 500 (which they could do at any time without Musk's offer), and also offered to keep anyone in who wanted in, Apple would probably not end up with a large stake in Tesla. And it would certainly be less expensive for Apple just to buy shares in the open market now.
The shorts, as they cover, are also going to be buyers, like it or not. The question now is not about who is buying, but who is going to sell, and at what price?
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
I understand your sentiment. However, as long as TSLA stays on the public market the shorts will never go away it seems. Sure, let's say they deliver profitable quarter after quarter, keep growing, keep investing profits in to further growth etc. Stock price rises, shorts are forced to cover, BUT new short positions will be taken up at $500, $600 and at $1000 and so on, all with the same core rationale: the business model isn't sustainable and their are ahead of themselves in valuation. I think if the short interest had gradually dropped in the last 2-3 years so that TSLA had become a "normal growth stock" like many other tech stocks then this would not have happened. I mean, there are of course investors who short AAPL, GOOG, AMZN etc. at any given time, who think they're overvalued, but there is no other stock with the level of shorting, vitriol, and resulting lies, FUD and smearing that TSLA has experienced.
Elon has a clear mission, and he does anything and everything possible to accomplish it. Part of the reason to go private is to put more focus on strategic growth. I don't see this ending up in a situation where one entity buys out a controlling stake and starts telling Elon what to do, effectively taking over the mission (presumably profit-oriented).
So how does this work, for Elon to continue his control over the mission? Does it depend on most of the dedicated longs staying in, and continuing their support for Elon? Personally i'm not getting out. Even if i don't understand the depth of the business, i have full faith in Elon to continue doing the best thing. I feel like many other investors think the same. My only worry at this point is the structure of the privatization, and how Elon will continue his control.
Good luck doing that and going private!
Basically I see no way for him to do that. We'll see how many groups he makes arrangements for, but I am pretty darn sure he can't handle everyone (such as people who have 401(k)s which can own stock but not private equity). I seriously doubt he'll manage to fix things for all the foreign retail stockholders. I'm not even sure he can manage to make arrangements for non-accredited investors.
People are going to get squeezed out, even if he manages to let most people stay.
I think this really does raise the possibility of a bidding war, especially since the Saudis are already trying to snap up shares and Tencent said they wanted to get in "early"...
I think whoever does bid on the company will probably also see the value in Tesla going private. Definitely could be wrong here. You raise a very interesting point that I haven’t seen mentioned yet. I honestly wouldn’t be opposed to Apple buying Tesla though. I’ve thought it seemed like a logical move for Apple for years now.
A Tesla is the closest thing to an iPhone there is in the auto world.
I’ve been trying to read back over all the pages I missed this afternoon, and I have seen very little discussion of “financing secured”. This financing seems critical to me but there has been no disclosure by Tesla as to who is providing this financing. Isnt a legal disclosure necessary when a public company secures financing? Or, maybe not when it is under consideration but once it is actually done.
Besides Larry Page, who do we think might provide financing? WS banks are excluded, public companies would have to disclose, so maybe a consortium of private investors who can fly under the radar?
Besides Larry Page, who do we think might provide financing? WS banks are excluded, public companies would have to disclose, so maybe a consortium of private investors who can fly under the radar?
Mike Smith
Active Member
Everyone at CNBC thinks it's very suspicious that Musk didn't talk about capital structure and financing .. in a letter to his employees.
Oh, there are timing rules about these things. Often the disclosures come *after* the financing is lined up. If you don't hear any disclosures in the next couple of weeks, *that* would be weird.
CNBC reported about 100 times in an hour that if something was really off, Tesla themselves would make a statement to the contrary.
It was noted their silence was confirmation something was in the works.
Elon Musk is not 100% of Tesla even though people forget that.
My nigh instantaneous read on the “Secured Financing” was that management has made the probably well-founded assumption that a supremely large majority of shares and shareholders will follow into the private equity vessel...meaning that Tesla’s cash outlay at the end of the day will be....ah, what’s the term?
Mouse nuts.
Mouse nuts.
Sovereign wealth funds, Chinese investors, corporate investors (don’t have to disclose right away).
Zhelko Dimic
Careful bull
For Canadians, it seems tax free vehicles can be used to hold share in private companies:
"It's a well-known fact that shares in publicly traded companies are generally eligible investments for an RRSP. But what about private company shares? Our tax law will allow an investment in a privately owned small-business corporation where you own less than 10 per cent of the issued shares of any class or, if you own more than 10 per cent, you're still arm's-length to the corporation and your total cost of the shares you own is less than $25,000. The rules are complex, so visit a tax pro if you're thinking of making an investment in a private company with dollars from a registered plan."
From: Creative RRSP investments: they could lead to a tax hit
"It's a well-known fact that shares in publicly traded companies are generally eligible investments for an RRSP. But what about private company shares? Our tax law will allow an investment in a privately owned small-business corporation where you own less than 10 per cent of the issued shares of any class or, if you own more than 10 per cent, you're still arm's-length to the corporation and your total cost of the shares you own is less than $25,000. The rules are complex, so visit a tax pro if you're thinking of making an investment in a private company with dollars from a registered plan."
From: Creative RRSP investments: they could lead to a tax hit
Thank you very much Zhelco, that covers one of two of my main questions. My other concern is if liquidity suddenly dries up in the options market can I do execute and cash out option covered by my broker as I can't fund my TFSA anymore. And if QuesTrade provides that as an option even. I'll be on the phone tomorrow morning asking them. Unless someone else can be super helpful?
Do I understand it right that the necessary condition for short squeeze to happen is that there is not enough current shareholders who do not plan to stick around after Tesla goes private and would be good with cashing in at slightly over offer price and sooner? Can't we actually come up with some estimate on who those would be and how much would they be willing to let go of?
Going forward, Tesla's risk will reduce as a private company, growth will be faster. I am a happy TSLA holder, I will be much happier to be an investor in the private Tesla. It will re-IPO in a few years.
I would be really sad if retail investors can't stay in. Knowing Elon, he won't let that happen.
Mario Kadastik
Active Member
You are looking at pure calls, but why not look at call spreads? If you also sell a 420 call at the same expiration, then that reduces your initial purchase cost of the lower leg and makes for a different profitability calculation. If you want to keep the shares and assume that 420 is the final offer by Tesla, then you could sell 425 or 430 calls as those would be OTM and your shares wouldn't be called away.
I did this with Jan 19 options and got 360-420 and 370-420 spreads at different times yesterday for 23.5 meaning that it's 150-180% gain if TSLA indeed delists for 420.
Don't know if this slipped by:
@elonmusk: Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote. Tesla on Twitter
@elonmusk: Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote. Tesla on Twitter
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