2017 Investor Roundtable: TSLA Market Action

[GoTslaGo]

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EDIT: I guess you were comparing two Fidelity filings, not the latest filing to the Nasdaq institutional SO page ( note to self - going forward no posting before morning coffee).

So to answer your question with a question, my violation of above note to self notwithstanding, should we assume that Fidelity converted the 1.25% Notes to shares because shares could have been voted, while Notes could not?

My thought was that the SCTY/TSLA merger somehow violated a "rule" that they may have had with regard to the 1.25% notes, so they cashed out (recall the discussion @brian45011 had way back when about the warrants being called and when announced).

This may have provided the extra "fire sale" shares that helped drive the SP down to the 180s. IIRC that was the hedge price of the warrants (around 184 or so, with holder's convertible price equivalent of 124-125 or so).

I would assume that if FMR converted the notes to shares to vote, then they should have more shares in their November filing.

Hence, I suspect this is why going into the fall of last year, the big shorts were short: likely they knew something about the rules of the warrant holders that we didn't (assuming the best, they may have read the rules better than us...).

Edit:

Note to self: need to look at Edgar more often...

Edit #2:

IIRC this is consistent with the data you had provided regarding shares to lend in the fall of last year. IIRC they were consistently in the low millions/high 100,000s in total number. Not like current piddly amounts. However my memory could be incorrect...

 

[GoTslaGo]

Found a thread by @DaveT regarding the convertible notes and warrants:

TSLA convertible notes and warrants

Will have to take some time to peruse. I believe there are still some notes left out there, and there is a second set of convertible notes floating out there with a much higher conversion price, but similar conditions.

 

[kenliles]

@Jayjs20
I'm in my thirties, and not a trader.
So I don't trade short term. I just buy and hold.

I have a good job and I don't spend much, this is why I am able investing in TSLA.
I only own 61 shares, which is ridiculous compared to other investors here, but that is what I'm able and confident to invest.

Ridiculous is the person that measures another's value, contribution, or strength of conviction by the number of shares they own. Been around this forum a long time, and that doesn't live here.

By the way, my little grandkids (3,4) have their entire Piggy bank in TSLA with 8 whole shares. They think your 61 are off-the-hook ridiculous!
Buy, Hold, and Live Free...

 

[neroden]

I don't pretend to know what Fidelity did with the notes or what effect that had on the stock price. I have no idea how many of the in-the-money 2018 notes are still extant; we'll see in the next 10-Q.

I can tell you what other convertible notes are out there.
$929 million 0.25% coupon Tesla convertibles due 2019, implied strike $359.87
$1.38 billion 1.24% coupon Tesla convertibles due 2021, implied strike $359.87
These are not convertible before expiration unless the price exceeds 130% of that, or $467.83.
The anti-dilution hedges purportedly give Tesla the option of buying the stock back at the strike, but the warrant buyers can then buy it back if it reaches $512.66 (For the 2019s) or $560.64 (For the 2021s). Tesla claims that these "effectively" increase the strike price to those levels, which is a claim which is not entirely detailed.

And unless they got refinanced during the merger (I didn't hear anything about that)
$230 million 2.75% coupon SolarCity convertibles due 2018, implied strike ~$561
$566 million 1.625% coupon SolarCity convertibles due 2019, implied strike ~$759
$113 million zero-coupon SolarCity convertibles due 2020, implied strike ~$300
Solar City states that they entered into capped call option agreements to reduce the dilution exposure but does not give details.

The 2018s were 1.5% coupon notes with an implied strike of a mere $124.52 and a "hedge" up to $184.48. They are deep in the money.

It's actually interesting to look at the debt profile. I assume SolarCity paid off the term loan due in December 2016; they have another one in December 2017 and another one in January 2021 all at 4% and all non-recourse (I wonder what secures them).
SolarCity's secured revolving credit facility had much higher interest rates than Tesla's. I wonder if Tesla can bring that down.
SolarCity has a complete mishmash of interest rates, even considering the varying term structures. I hope that Tesla can refinance some of the more expensive ones.

Actually, now -- well, late 2017 or early 2018 after Model 3 is being delivered -- might be a good time for Tesla to issue some long-term straight-up corporate bonds, to lock in low fixed interest rates. Both Tesla and SolarCity have rather large revolving loan facilities which have variable interest rates, which create a risk from rising interest rates.

 

[aubreymcfato]

Ridiculous is the person that measures another's value, contribution, or strength of conviction by the number of shares they own. Been around this forum a long time, and that doesn't live here.

By the way, my little grandkids (3,4) have their entire Piggy bank in TSLA with 8 whole shares. They think your 61 are off-the-hook ridiculous!
Buy, Hold, and Live Free...

This is true, but I explicitly mentioned the real number of my share to reassure @Jayjs20: sometimes the sheer numbers of figures I see mentioned here on this forum makes me uncomfortable, feeling as this is not a game for small fish like me.
I don't think this is the case, but the doubt sometimes persists ;-)

 

[MartinAustin]

Trump threatens BMW with border tax on cars built in Mexico

Hmmm, he's threatening everyone except Tesla. May be a way to support them without doing it directly.

 

[GoTslaGo]

I have exited my short term positions the last 3 days. I am positioning a little more conservatively for inauguration headaches.

IIRC the inauguration this year falls on the same day as double witching day (Friday Jan 20). Just keep in mind before attributing to any inauguration affects.

Options calendar (2017):

Options Expiration Calendar 2017

As an aside:

Saw this interesting link from that one above:

Bernie Madoff is cornering the prison market on Swiss Miss hot chocolate

“Bernie really was a successful businessman with quite original insights into the market, and he’s continued applying his business instincts in prison,” Fishman said. “At one point, he cornered the hot chocolate market. He bought up every package of Swiss Miss from the commissary and sold it for a profit in the prison yard. He monopolized hot chocolate! He made it so that, if you wanted any, you had to go through Bernie.”

 

[kenliles]

Bernie Madoff is cornering the prison market on Swiss Miss hot chocolate

“Bernie really was a successful businessman with quite original insights into the market, and he’s continued applying his business instincts in prison,” Fishman said. “At one point, he cornered the hot chocolate market. He bought up every package of Swiss Miss from the commissary and sold it for a profit in the prison yard. He monopolized hot chocolate! He made it so that, if you wanted any, you had to go through Bernie.”

Makes you wonder if he funded that monopoly with other people's $s.
Either way
Outside prison, that kind of activity can get you back in
Inside prison, he might find something else 'going through Bernie'
Sounds like the rehab is going well...

 

[erthquake]

Trump threatens BMW with border tax on cars built in Mexico

Hmmm, he's threatening everyone except Tesla. May be a way to support them without doing it directly.

That's great until Germany retaliates and starts slapping tariffs on every Tesla sold there.

 

[TrendTrader007]

Great advice. I started carefully, and after few years of great success started doing 'all in', or close enough. I made x yearly salaries over few years, and then lost 2/3*x yearly salaries on Tesla. Very unpleasant.
I've recovered some since, but my lowered tolerance to risk wouldn't let me recover as quickly, as I can't stomach 'all in' anymore. Hence waiting for $380
So, yeah, GREAT, GREAT advice

* x>5

i trade a single stock and put 100% of my portfolio in a single stock. been doing that since 1998. currently TSLA makes up 120% of my portfolio. my long term returns range from 23% to 50% annualized over the last 5 years
different strokes for different investors. 99% of traders/investors would consider my strategy to be reckless but it has worked for me over the years.
so, i am glad that most traders/investors do not do what i do but i love my strategy and right now TSLA seems to be the perfect vehicle to accomplish my goals

 

[Papafox]

i trade a single stock and put 100% of my portfolio in a single stock. been doing that since 1998. currently TSLA makes up 120% of my portfolio. my long term returns range from 23% to 50% annualized over the last 5 years
different strokes for different investors. 99% of traders/investors would consider my strategy to be reckless but it has worked for me over the years.
so, i am glad that most traders/investors do not do what i do but i love my strategy and right now TSLA seems to be the perfect vehicle to accomplish my goals

You make an interesting point. For most investors, a single-stock strategy is just too volatile and risky, which leaves to sleepless nights, etc. On the other hand, how many of you have the time to pour the same amount of time into researching each of 4 other stocks as you spend researching TSLA? In a perfect world, we have some diversification, but how many of you know of 4 other stocks that currently look as promising as TSLA? Personally, I think it's good to have some diversification so that you always have available "dry powder" when TSLA makes an unexpected dip, but I can appreciate TrendTrader's approach. We only have so much time during a day to watch our investment choices, and with each choice we add we take time away from the others.

 

[1kEE]

i trade a single stock and put 100% of my portfolio in a single stock. been doing that since 1998. currently TSLA makes up 120% of my portfolio.

I'm slowly migrating towards the "trade one thing that you understand well" strategy. Trading something without truly understanding it is pointless, and I only have the time/mental capacity to understand and follow one stock really well.

As to magnitude of position, I was as much as 150% of trading account and 75% of net worth into the stock at our recent bottom (for about 15 days, and it was not comfortable hahah but well worth it) and thinned it down to half that in stock and enough options to achieve a similar effect as that much stock.

TrendTrader, do you prefer stock on margin to options? I'm still new to options and am getting a feel of the advantages and disadvantages of using them vs stock on margin.

 

[austinEV]

Trump threatens BMW with border tax on cars built in Mexico

Hmmm, he's threatening everyone except Tesla. May be a way to support them without doing it directly.

I think the "Trump Proofing" of TSLA has been a big part of the recent strength. Right after the election TSLA traded sideways vs the market since the conventional wisdom is that he would be bad for EV subsidies/green. But now I think people have figured out that TM is well positioned now. (and as Elon has said, killing the federal tax credit would benefit TM, but I don't think the market gets that)

 

[Zhelko Dimic]

I'm slowly migrating towards the "trade one thing that you understand well" strategy. Trading something without truly understanding it is pointless, and I only have the time/mental capacity to understand and follow one stock really well.

As to magnitude of position, I was as much as 150% of trading account and 75% of net worth into the stock at our recent bottom (for about 15 days, and it was not comfortable hahah but well worth it) and thinned it down to half that in stock and enough options to achieve a similar effect as that much stock.

TrendTrader, do you prefer stock on margin to options? I'm still new to options and am getting a feel of the advantages and disadvantages of using them vs stock on margin.

I've run 75% returns 3 years in a row (really, every single year somhow landed with the same return), until I squandered almost all gains on Tesla.
Cause of that is 1. leverage, 2. Horrific Model X ramp 3. SCTY acquisition

Be careful with options, really careful. I have stamina to stay through dips, but being on the wrong side of time decay could hurt you (it did me) badly

 

[ricardocabesa]

Trump threatens BMW with border tax on cars built in Mexico

Hmmm, he's threatening everyone except Tesla. May be a way to support them without doing it directly.

He can't impose a tariff. It doesn't work that way-on a whim of his.

 

[ricardocabesa]

I'm slowly migrating towards the "trade one thing that you understand well" strategy. Trading something without truly understanding it is pointless, and I only have the time/mental capacity to understand and follow one stock really well.

TrendTrader, do you prefer stock on margin to options? I'm still new to options and am getting a feel of the advantages and disadvantages of using them vs stock on margin.

Good advice. With a few rare exceptions,I have been doing just for the past 20+ years,trading both stock and options of an airline that both my Father and I retired from.

 

[RobStark]

That's great until Germany retaliates and starts slapping tariffs on every Tesla sold there.

Germany has a rather large trade surplus with the US.

Trade war means US loses but Germany loses more.

Less Teslas to Germany/EU but more to US since less S Class, 7 Series, A8 etc.

 

[RobStark]

Trump threatens BMW with border tax on cars built in Mexico

Hmmm, he's threatening everyone except Tesla. May be a way to support them without doing it directly.

Or maybe Trump just enjoys making threats.

 

[NOLA_Mike]

Germany has a rather large trade surplus with the US.

Trade war means US loses but Germany loses more.

Less Teslas to Germany/EU but more to US since less S Class, 7 Series, A8 etc.

It's complicated because I believe the BMW manufacturing plant in Spartanburg, SC is now the single largest BMW plant in the world (making X5 and X3 and the like) for both US and export.

Trump threats from his bully pulpit (twitter) should really stop. I'm beginning to wonder if he can compose a sentence longer than 160 characters.

 

[neroden]

i trade a single stock and put 100% of my portfolio in a single stock. been doing that since 1998. currently TSLA makes up 120% of my portfolio.

Yeah, but do you have an outside source of income or wealth outside the portfolio?

I have to be more cautious than that because the bulk of my income has to come out of my portfolio. If I were even 100% invested, a temporary downturn could leave me unable to pay my bills, which is no good.