2017 Investor Roundtable: TSLA Market Action

[racer26]

Wonder if this is worth comparing to the VW squeeze setup?

Its been done.

VLKAY had around 13% short interest at the time.

Porsche held 42% directly, and held a further 32% in cash-settled options it intended to exercise.
The State of Lower Saxony held a 20% stake.

That meant that 94% of the shares were spoken for by 2 shareholders, and the remaining 19% of shareholders only had 6% to share between them.

TSLA currently has about 19% of its shares sold short.

Elon holds about 21% of the company.
According to NASDAQ, Institutions hold about 64% of the company
NASDAQ does not currently show Tencent's reported 5% which could be as much as 10% now.

That's 90-95% spoken for, and 19% sold short. Eerily similar to VLKAY's squeeze, with the potential to be even more violent.

Now, some fraction of those institutions are gonna be a bit squishier holders than Lower Saxony and Porsche were, so that should alleviate some of the pressure, but there is definitely potential for it to happen. Its a very crowded theatre waiting for someone to yell fire.

 

[LoL Rick]

Clincher. I like that word.

I'd like to take it on as my nick name.

Please vote by rating this post Like or Disagree.

All the other ratings were taken, so I clicked informative.
But really, you can't give yourself a nickname. A nickname has to be given by someone else.

 

[racer26]

That makes me wonder what the short "thesis" is for shorts these days and if those 31m shares are "tesla is a ponzi scheme" shorts that believe it's going bankrupt or if they are just "smart" shorts that are saying tesla is overvalued, might as well go short and make the 10 or 100 bucks then go long, or quants.

I've said this many times - I don't understand the thesis.

There are a *huge* number of $50 put contracts open for the January 2019 expiry.

This makes no sense to me. $50/shr = $8B valuation.

Thats a price/revenue ratio of 1, based on 2016's S/X sales alone. I see no chain of events that can lead to TSLA being worth less than 2016's sales in 2019.

 

[bdy0627]

Funny how everyone is rejoicing over a 2-and-a-bit percent rise. "When I were yoong..." movements of 5-8% (more up than down, but lots of both) were needed to get this sort of posting.

I think it's more about what this likely means regarding resumption of the trend than the actual gain today. That's what's got me excited anyway.

 

[adiggs]

Its been done.

VLKAY had around 13% short interest at the time.

Porsche held 42% directly, and held a further 32% in cash-settled options it intended to exercise.
The State of Lower Saxony held a 20% stake.

That meant that 94% of the shares were spoken for by 2 shareholders, and the remaining 19% of shareholders only had 6% to share between them.

TSLA currently has about 19% of its shares sold short.

Elon holds about 21% of the company.
According to NASDAQ, Institutions hold about 64% of the company
NASDAQ does not currently show Tencent's reported 5% which could be as much as 10% now.

That's 90-95% spoken for, and 19% sold short. Eerily similar to VLKAY's squeeze, with the potential to be even more violent.

Now, some fraction of those institutions are gonna be a bit squishier holders than Lower Saxony and Porsche were, so that should alleviate some of the pressure, but there is definitely potential for it to happen. Its a very crowded theatre waiting for someone to yell fire.

The obvious difference using your numbers is that instead of a single actor owning / controlling 72% (Porsche in the former case), you have 64% held by institutions in TSLA. Some of those institutions are strong and long, some are weak, some are probably there for window dressing. The one longish article about the VW squeeze I read, Porsche was making a serious bid to take control of VW and nearly pulled it off.

I still see lots of potential for a short squeeze, but I don't see the Porsche extreme as being on the table. If nothing else, any number of those institutions will cheerfully sell if the stock doubles or triples - they're not in a position to take control, nor do they desire to take control. So there will continue to be shares available as the price rises.


I agree it's a very crowded theater, with trash cans on fire all around, waiting for somebody to yell fire. I see the institutional holding in TSLA today as being significantly more squishy than the VW case, simply due to the control angle not being part of the investment thesis or behavior.

And I think for us as long investors, this is a better setup. Because after all, if TSLA was a good short candidate at $200/share, it must be an amazing short opportunity at $350. It's hard to even imagine how good of a short it'll be at $500/share. A nice steady rise has a reasonable chance of drawing in new shorts as old shorts get margin called out

Can you dream of the opportunity when TSLA gets to $1000!?!

 

[winfield100]

Short squeeze is mechanical, and despite what some here say, it has nothing to do with profits.

AMZN and APPL didn't go through short squeezes because they didn't have such huge short interests. No large-cap company ever had $10B+ short interest.

The only comparable situation to TSLA today is TSLA in April 2013 w/ adjustments to liquidity and size.

a slite correction
based on todays close of $347.3487/share
AND the short interest on 5/15/2017 of 31,692,585 shares
shorts now owe
$11,008,378,199.39 <<---SMOG (sweet mother of ghod!)
a bit over 11 Billion dollars
ROFWSIG or ROFL""
(ROFwhile screaming incoherent gibberish)
(i expect to get shot if a short ever finds me)

 

[LargeHamCollider]

This *feels* like 2013 again, checking the ticker gives me a buzz. The differences are:

1. It's not as dramatic.
2. I have about 20x the cash to play with.
3. This time I won't try to be clever and miss half the ride.

 

[ValueAnalyst]

a slite correction
based on todays close of $347.3487/share
AND the short interest on 5/15/2017 of 31,692,585 shares
shorts now owe
$11,008,378,199.39 <<---SMOG
a bit over 11 Billion dollars
ROFWSIG or ROFL""
(ROFwhile screaming incoherent gibberish)
(i expect to get shot if a short ever finds me)

ROTFLMAOYSST

Rolling On The Floor Laughing My A.s Off Yet Somehow Still Typing

 

[winfield100]

If they can exit in an orderly fashion, we'll see the short interest number backing down slowly, maybe a few M shares per half month, coupled with a steady SP rise.

ah, thats the rub, isn't it? I am doing my best "A Sunnybeach" routine on SA, by relentlessly pointing out the excruciating rise in money owed by shorts, every few hours, in multiple articles, with a "still time to cover" they are wound tighter than a coil spring about to pop, so i cheerfully add they don't want to be the last to get out. (now over $11 Billion!!. some certainly have "unique" but repetative curses.

a voting pebble, starting the avalanche, a disorderly stampede, so to speak, finding the torture point and constantly poking it
gawd, retirement is fun sometimes

 

[mejojo]

Clincher. I like that word.

I'd like to take it on as my nick name.

Caution: Urban Dictionary: clincher

 

[mejojo]

All the other ratings were taken, so I clicked informative.
But really, you can't give yourself a nickname. A nickname has to be given by someone else.

T-Bone!

 

[winfield100]

I've said this many times - I don't understand the thesis.

There are a *huge* number of $50 put contracts open for the January 2019 expiry.

This makes no sense to me. $50/shr = $8B valuation.

Thats a price/revenue ratio of 1, based on 2016's S/X sales alone. I see no chain of events that can lead to TSLA being worth less than 2016's sales in 2019.

i poked Montana Skeptic relentlessly for a bit and he alluded his options were put and very long term (like 1/18/2019 or so), but he also said he didnt care if they expired 100% worthless. a suspicious person thinks OPM, who don't care perhaps
what does open interest of 26,760 mean in terms of loss if they expire worthless? the $50 contracts.

 

[mejojo]

I see the institutional holding in TSLA today as being significantly more squishy than the VW case, simply due to the control angle not being part of the investment thesis or behavior.

Is your idea that the institutionals will not be clued-in to a squeeze and won't be working to get a LOT out of it? I would think these guys are licking their chops at the prospect and are just waiting to get shorts over the barrel.

 

[ValueAnalyst]

Caution: Urban Dictionary: clincher

ABORT!!! ABORT!!! ABORT!!!

 

[SteveG3]

This is really the clincher for me on the short squeeze stuff.

No large cap stock has ever had this high a short interest. TSLA doesn't generally behave like the large-cap stock it is. Eventually, something is going to give. You simply can't buy up 20-30% of all the shares of a large cap in a big hurry without causing a squeeze.

I don't know which straw will break the camel's back - I just know that at some point, that short interest has to go away, and the longer they wait, the more painful and sharp the rise will be.

My sense is that it is somewhat more likely than not that the short position will not drop below 10% until the 2020s.

Consider:

- while I've not checked on this with any rigor, I suspect racer26 is more or less correct that no large cap ever has had this kind of short interest, at least not for 4 years running as Tesla has had as a large cap (fwiw, 'perma-short" position was in place before this)

- in 2013 as the stock price multiplied many fold, the lowest the the short position dipped to was about 18%

- Tesla is disrupting two different trillion dollar industries

-Tesla would likely have several billion dollars more cash today were the short interest not putting downward pressure on the share price... perhaps the M3 could of been out a year or two earlier, perhaps Tesla would already have the cash for the next GF and auto factory (a couple of examples for context on the short position making capital raises considerably less efficient, and in so doing, slowing Tesla's disruption down,: in the fall of 2012 Tesla had to issue an additional 4% more shares for a haul of... $128 million, and, less than 3 months ago, with the stock at about $250, Tesla raised about $1 billion).

Obviously, this is speculative, but, for several years now, I've thought there is a considerable chance that the majority of the short position is an investment by the deepest of pockets to slow Tesla and the transition from fossil fuels down, not some misguided conviction about making money betting against a stock seen as overvalued. This is similar to the fact that I believe the majority of FUD pieces from well known outlets are written or produced by people who know what they are writing or airing is false (and, fwiw, their is money in some form behind such media pieces, even if much, or even all, of it may be the relatively innocuous scenario of putting out stories that big ad buyers will like without some sort of direct payoff of writers, producers).

 

[WarpedOne]

the majority of the short position is an investment by the deepest of pockets to slow Tesla and the transition from fossil fuels down

With the hope of not just slowing but stopping.
Yes, there are plenty wealthy people who still believe and wish oil can survive. And have the money to help make it sure it will.

My money is on them failing.

 

[TrendTrader007]

Thanks for recommending "Reminisces of a Stock Operator", about the life of the great stock speculator Jesse Livermore. Great book! I bought the version Annotated by Jon Markham.

Two of the major lessons he learned is to only go long in a bull market, and not to sell too early (not to try to trade the dips). I think that now Tesla is a "bull stock " and that selling it now is a foolish decision. Not an advice.

You're most welcome. I have the Jon Markman version too beside the classic one I read it about 5 or 6 times the greatest book ever written on stock market speculation
Remember in 1929 Jesse Livermore was one of the richest men in the world having made a profit of $100 million being short in the market going into crash of 1929. JL was the Babe Ruth of speculation. I aspire to be like him and love swinging a big line. Except I don't want to share the same fate. In 1946 or so he committed suicide in a bout of severe depression after losing almost all his fortune. It's a cautionary tale about one of the greatest stock operators who ever lived. If the greatest speculator of all times could lose it all then you and I ought to be very humble. Never get a swollen head in the markets . It's easy to make millions and billions in the markets and even easier to lose it all.
Remember the scene from Indians Jones movie with Harrison Ford and Sean Connery where he is choosing the ark. Only the penitent man shall survive. We speculators live and die at the pleasure of the Gods of stock market. Never forget that.
My biggest hero is Cornelius Vanderbilt who made the shorts pay dearly in the railroad corner short squeeze in 1800s
Read the First Tycoon
Other good books are :
How I made $2 million in stock market by Nicolas Darvas
Boy Plunger about JL
How to make money in stocks by William O'Neill
The greatest stocks of all times by Randall of Worth Magazine
Battle for Investment survival
The Successful investor by William O Neil
How to short stocks by O'Neill
Common stocks uncommon profits by Phil Fisher
I've read hundreds of books about the markets and these seem to be among the best
If you're serious about becoming a multimillionaire or billionaire then read all you can about Dan Zanger of chartpattern.com and subscribe to his newsletter it's $100 a month or so I believe. Dan Zanger made $40 million in less than 2 years starting with $10k and is one of the greatest chart readers of contemporary times
I walk in the shadow of giants while crossing the valley of death called the stock market and woe befalls those who become too proud in this profession

 

[ValueAnalyst]

My sense is that it is somewhat more likely than not that the short position will not drop below 10% until the 2020s.

Consider:

- while I've not checked on this with any rigor, I suspect racer26 is more or less correct that no large cap ever has had this kind of short interest, at least not for 4 years running as Tesla has had as a large cap (fwiw, 'perma-short" position was in place before this)

- in 2013 as the stock price multiplied many fold, the lowest the the short position dipped to was about 18%

- Tesla is disrupting two different trillion dollar industries

-Tesla would likely have several billion dollars more cash today were the short interest not putting downward pressure on the share price... perhaps the M3 could of been out a year or two earlier, perhaps Tesla would already have the cash for the next GF and auto factory (a couple of examples for context on the short position making capital raises considerably less efficient, and in so doing, slowing Tesla's disruption down,: in the fall of 2012 Tesla had to issue an additional 4% more shares for a haul of... $128 million, and, less than 3 months ago, with the stock at about $250, Tesla raised about $1 billion).

Obviously, this is speculative, but, for several years now, I've thought there is a considerable chance that the majority of the short position is an investment by the deepest of pockets to slow Tesla and the transition from fossil fuels down, not some misguided conviction about making money betting against a stock seen as overvalued. This is similar to the fact that I believe the majority of FUD pieces from well known outlets are written or produced by people who know what they are writing or airing is false (and, fwiw, their is money in some form behind such media pieces, even if much, or even all, of it may be the relatively innocuous scenario of putting out stories that big ad buyers will like without some sort of direct payoff of writers, producers).

If we assume Tesla will be worth $250 billion by 2020, which I believe is conservative, then 10% short would mean a $25 billion collective position.

Unlikely. Keep in mind that one holding cannot make up the majority of a short fund's assets at larger long/short hedge funds. They have position limits. So, say, one position can at maximum comprise 10% of a fund, that would mean $250 billion short AUM needed in all long/short firms and 10% of each firm must be in TSLA short, which is super unlikely on its own. There just isn't that much committed capital on the short side.

I agree with the rest of your post.

 

[SteveG3]

With the hope of not just slowing but stopping.
Yes, there are plenty wealthy people who still believe and wish oil can survive. And have the money to help make it sure it will.

My money is on them not failing.

Indeed, for a time with the hope of stopping. That 4% cap raise in the fall of 2012 for $128 million was for a Tesla under some considerable pressure. They were on the cusp of breaking the terms of their DOE loan. In fact, that fall, in an interview with Elon, where for the most part he spoke about the promise of the Model S and its ramp, he finished the interview by looking straight into the camera, and saying, (paraphrasing from memory) ~but we could fail~ [as in, game over for Tesla] I've not been able to find that interview in searches the past couple of years, but, I watched it several times when it came out.

 

[SteveG3]

If we assume Tesla will be worth $250 billion by 2020, which I believe is conservative, then 10% short would mean a $25 billion collective position.

Unlikely.

Keep in mind that one position cannot make up the majority of a short fund at larger long/short hedge funds.

There just isn't that much committed capital on the short side.

think some more about who I might mean by the deepest of pockets. hint, dropping $25 billion would be "child's play" to repeat a phrase from Elon. as I wrote, I'm not talking about someone looking to make money directly on the short trade, but rather to pay some money in that trade as an investment to, at one point, end, and now more so, slow down, Tesla and the transition from fossil fuels.