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A way to pay for taking Tesla private

Discussion in 'Tesla, Inc.' started by Michael Sinz, Aug 7, 2018.

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  1. Michael Sinz

    Michael Sinz Member

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    TDLR; A short squeeze could easily pay for the whole takeover!

    I am going to lay out an interesting theory by first giving some facts as to Tesla and then telling the story of the Porsche takeover of VW.

    A bit of detail: There is about 25% of available Tesla stock that is on loan to shorts. Yes, 25% of available stock!
    Keep the above fact in mind as I outline what happened with Porsche and the VW takeover.

    In March of 2008, Porsche owned 31% of VW and stated publicly that it did not intend to increase that to 75%. Lower Saxony holds 20%, so Porsche reasoned it would be too difficult and expensive to acquire basically all other shares on the market.

    On 26 Oct 2008, Porsche revealed that it had increased its stake from 31% to 43%, plus 31% in options -- 74% of the shares of VW.

    Problem: as of that date, 13% of the company was on loan to speculators short the stock, and 74% + 20% + 13% = 107%. So if Lower Saxony didn't intend to sell them any (it didn't), and Porsche didn't intend to sell them any (it certainly didn't), the speculators would be completely incapable of covering those short positions. To add insult to injury, the other 6% belonged to index-tracking funds, also unlikely to sell on short-term moves.
    In other words, Porsche could pretty well set its price and force the speculators to pay it. The price exploded, going from 200 to 1000 per share in just a couple of days.

    Porsche was clear that their intent was not to corner the market but to takeover VW, which had long been part of their plans. Either way, due to the massive short squeeze, hedge funds and investment banks ended up paying for a huge portion of Porsche's costs to acquire VW, with tens of billions in losses.

    So, now, lets look at what Elon is maybe doing - he personally owns 20% of the company. He just tweeted a $420 price which is high enough that he could easily get significant number of options for that price. If the shares he owns plus the options plus those not going to sell leaves less than 25% remaining, what is going to happen to the shorts? They will end up driving the price very high - lets say 5x like with VW so we get close to $2,000 per share. Elon can help fill those shorts from some of his actual shares at huge profit and turn around and pay for all of the options he has at the $420 price he just set. Thus, not only do the shorts lose their shorts (and shirts) but they effectively fund the cost of taking Tesla private.

    The trick is tying up, say, 80% to 90% of the stock (via direct holdings *plus* options) in some way (such as the story from Porsche's purchase of VW)

    Anyway, maybe I am looking at this too deeply but if I were playing at this game, that would be my play to both dump the shorts and take Tesla private.
     
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  2. HankLloydRight

    HankLloydRight No Roads

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    Very interesting.
     
  3. Michael Sinz

    Michael Sinz Member

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    Note that earlier in the day, before the stop in trading and Elon tweet about taking Tesla private, the Saudi Arabia sovereign wealth fund announced a 5% stake in Tesla. Likely a friendly, will not sell type of stake. That seems like an amount that could easily secure such a squeeze play.
     
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