2017 Investor Roundtable: TSLA Market Action

[AudubonB]

More:
Tencent hit the 5.0% ownership level, according to the 13G, on 17 March. It is normal business practice for those accumulating positions to hit the markets hard in the period between hitting disclosure levels and releasing the required forms (ten business days, I believe).

Guess what's happened to share price and trading volumes in those subsequent days? I can absolutely, positively guarantee that Tencent has a lot more shares now than they did on 17 March.

 

[jbcarioca]

Can someone please explain to me the following?

...
Any other explanation possible?

Sure there are myriad other possible explanations but Tencent is clear and obvious, plus their average purchase price as well as the 13G filing timing suggest your logic is sound.

IMHO the more interesting question is the longer term implication of the Tencent position, and the likelihood that they're continuing to accumulate. I opined just above, but I'm really interested in other views.

 

[Nate the Great]

I'm wondering how the short availability trace is looking - maybe the erratic buys are coming from a big short trying to unwind - but it didn't look like it from @vgrinshpun's post this morning...

Fidelity

376,539 1.000 %

 

[racer26]

So if we all more or less agree that Tencent's investment must have been built since the start of December in order to have a book value that low, and we think that Tencent would have done what most buyers in their position do (aggressively continue accumulating in the period between reaching a reporting threshold and the publication of that report, which is supported by the action in the last 10 days) and we think they may still continue to accumulate - what's their target? How much of TSLA do they want to own?

 

[aubreymcfato]

The "Tencent takeover" scenario is getting me a little nervous.
I remembered that Musk has still few goals to achieve to unlock all the options:
Elon Musk Ahead of Pace for $1.6 Billion Tesla Motors Payday

Do we know how many shared (and related %) of Tesla he could theoretically accumulate?
Also, I imagine that JB, his brother and a lot of people near him (family, management, workers) do possess a lot of shares, but I wonder if it's "mouse nuts" or it could move the needle, in the future.

 

[vgrinshpun]

I'm wondering how the short availability trace is looking - maybe the erratic buys are coming from a big short trying to unwind - but it didn't look like it from @vgrinshpun's post this morning...

No signs of covering at Fidelity...

 

[jbcarioca]

Whatever happens it is clear that Tencent, at least, is optimistic about Tesla meeting Model 3 expectations and probably some other objectives such as storage sales and maybe even some positive results from solar roofs, despite others having tried and failed on that last objective.

 

[neroden]

I would agree that the only plausible explanation for that many shares to be announced now with that low a book value is that Tencent is our mystery buyer that drove the climb from 180->280.

It would have been actually tricky to get their average price that low just through stock purchases, unless they bought most of the shares way at the beginning of the run! I have a lower average but I used SolarCity options. I have to wonder if Tencent used options or other derivatives to lock in lower prices early without actually receiving the stock until later.

 

[racer26]

The "Tencent takeover" scenario is getting me a little nervous.
I remembered that Musk has still few goals to achieve to unlock all the options:
Elon Musk Ahead of Pace for $1.6 Billion Tesla Motors Payday

Do we know how many shared (and related %) of Tesla he could theoretically accumulate?
Also, I imagine that JB, his brother and a lot of people near him (family, management, workers) do possess a lot of shares, but I wonder if it's "mouse nuts" or it could move the needle, in the future.

Well, 2 of Elon's CEO tranches are about to vest any day now (200k vehicles and Model 3 beta), with a 3rd (Model 3 production) and possibly 4th (300k vehicles) later this year.

Each one of those is good for 527k shares to join the 33.6M shares he already has as of the secondary last week.

 

[neroden]

So if we all more or less agree that Tencent's investment must have been built since the start of December in order to have a book value that low, and we think that Tencent would have done what most buyers in their position do (aggressively continue accumulating in the period between reaching a reporting threshold and the publication of that report, which is supported by the action in the last 10 days) and we think they may still continue to accumulate - what's their target? How much of TSLA do they want to own?

We have no idea. They have so much money they could be aiming for all of it. But I don't think so.

They probably want to avoid investigation by the federal government about Chinese investment in the US, so maybe they stop at 19%?

 

[neroden]

The "Tencent takeover" scenario is getting me a little nervous.
I remembered that Musk has still few goals to achieve to unlock all the options:
Elon Musk Ahead of Pace for $1.6 Billion Tesla Motors Payday

Do we know how many shared (and related %) of Tesla he could theoretically accumulate?

I haven't added that up but the total stock options are about 24 million shares so his unexercised options can't be more than that and has to be less.

Also, I imagine that JB, his brother and a lot of people near him (family, management, workers) do possess a lot of shares, but I wonder if it's "mouse nuts" or it could move the needle, in the future.

It's mouse nuts. Insiders are about 1% of the shares outstanding.

I'm not sure about ordinary employees with stock options (who don't have to report to the SEC), but I don't think it's that much.

 

[mmd]

More:
Tencent hit the 5.0% ownership level, according to the 13G, on 17 March. It is normal business practice for those accumulating positions to hit the markets hard in the period between hitting disclosure levels and releasing the required forms (ten business days, I believe).

Guess what's happened to share price and trading volumes in those subsequent days? I can absolutely, positively guarantee that Tencent has a lot more shares now than they did on 17 March.

In that case, wouldn't the 13G filing reflect the current holding as of the day of the filing?
BTW, is there any information on when Tencent started accumulating?

 

[Ovulation]

So if we all more or less agree that Tencent's investment must have been built since the start of December in order to have a book value that low, and we think that Tencent would have done what most buyers in their position do (aggressively continue accumulating in the period between reaching a reporting threshold and the publication of that report, which is supported by the action in the last 10 days) and we think they may still continue to accumulate - what's their target? How much of TSLA do they want to own?

Well it's interesting to speculate isn't it ... China is dead serious to get rid of fossil fuels, Tencent and the Chinese government are tightly connected, tencent has their hands in the biggest ride sharing company in the world, Tesla has a strong brand in the West ...

 

[neroden]

In that case, wouldn't the 13G filing reflect the current holding as of the day of the filing?

You know, I think so, but I don't know.

BTW, is there any information on when Tencent started accumulating?

Nope!

Secondary offering was March 17, day of filing is March 24 (which is probably when they *received* the shares from the offering or something, I don't know). They could have bought a pile of stock on Monday though, we'd be none the wiser. They don't have to file again until they reach 10%, I believe.

 

[AudubonB]

In that case, wouldn't the 13G filing reflect the current holding as of the day of the filing?
BTW, is there any information on when Tencent started accumulating?

No. It works as follows: I need to create a 13G the date I amass a 5% position in a company, but I do not need to file that until ten business days have passed. Therefore, I can keep accumulating prior to the disclosure.

And, of course, I can keep accumulating subsequently, although, as of course today's market action demonstrates, there typically is a significant price rise upon the release. So, in retrospect, market entrail-readers invariably say "Ah ha! There is the reason we've had significant upward pressure on high volume in the prior ten days".

 

[cranker2k]

So at this point do we think market will pull back a bit after the Tencent 5% stake news, and then go back up in April and then up/down in May depending on good news/bad news?

Some factors bring stock down: current news have 1) employee harassment suit as issues in Fremont plat, and 2) first quarter traditionally has slowest delivery each year.

Of course other news can bring it up: 1) Model 3 tech leaks that "wow" before reveal, 2) Solar roof order overwhelming, 3) 8.1 rollout of EAP update on par with AP1?

 

[Crowded Mind]

Regarding the cost basis of $217 -- couldn't Tencent have been accumulating this position over many years and are just now hitting 5% ownership? Meaning there is a possibility that they would not necessarily be a primary driver of the price appreciation since December?

 

[elasalle]

You are correct. They have to file again each time their holdings increase by 5%; so if they exceed 10%, 15%, or 20%. If they exceed 20% they have to file form 13D.


I hope they don't attempt to take over Tesla entirely and wipe us small stockholders out! They could. They have the money. This is the first institutional investor which could plausibly buy more shares than Musk if they wanted to. Their net income is equivalent to $6 billion US per year. They only took a $2 billion stake in Tesla. They could triple it without blinking.

The 13G is a statement that they intend to be a passive investor, but they aren't required to keep that intent forever.

I assume Musk is talking to them!

Given their stake, they could al

No signs of covering at Fidelity...

View attachment 220187

With vehicle delivery numbers supposed to come in next week, could the shorts be holding out for a few more days?

 

[geneclean55]

So at this point do we think market will pull back a bit after the Tencent 5% stake news, and then go back up in April and then up/down in May depending on good news/bad news?

Some factors bring stock down: current news have 1) employee harassment suit as issues in Fremont plat, and 2) first quarter traditionally has slowest delivery each year.

Of course other news can bring it up: 1) Model 3 tech leaks that "wow" before reveal, 2) Solar roof order overwhelming, 3) 8.1 rollout of EAP update on par with AP1?

Possible, but as we are so close to quarter end and likely portfolio rebalancing in favor of TSLA I think it will be tough to get a big pull back.
Next week is a different matter.

 

[geneclean55]

Another crack at 280 coming up

Edit: Breached it briefly. Good that it isn't bouncing hard off 280 unlike this morning