Elon Musk vs. Short sellers

[ZsoZso]

I don’t think we will see VW in 2008. The reason is simple: there is no element of surprise in TSLA. It is a high stakes poker game but any outcome has been discussed many times. We will hear lots of noise but I doubt we will see a 2000 USD share price. Many shorts are in options- they will just expire. Other shorts are hedged with options. The shorts simply had too much time to get prepared... (all my take/opinion)

Sure, there are many shorts with options, but the fact remains that there are about 35 million shares shorted. Those are not options, they are direct short sales that must be covered before the stock is de-listed. If the number of long shares not going private is less than 25 million, then squeeze worse than VW will happen.

 

[neroden]

Sure, there are many shorts with options, but the fact remains that there are about 35 million shares shorted. Those are not options, they are direct short sales that must be covered before the stock is de-listed. If the number of long shares not going private is less than 25 million, then squeeze worse than VW will happen.

While this is correct, my math says that the number of shares not going private is probably more than 35 million. I don't really know how much more, and I wish I had a better basis for guessing.

 

[SOULPEDL]

We do generally allow private placements, or shares of private companies in IRAs, however we review each security on a case by case basis.

FYI, different response from TDA for me. See the main thread on this topic here Self Directed IRA discussion

Ref my post #33.

 

[AlMc]

FYI, different response from TDA for me. See the main thread on this topic here Self Directed IRA discussion

Ref my post #33.

We shall see. Thanks for the link.

 

[SOULPEDL]

We shall see. Thanks for the link.

Exactly, but any chance of missing the boat because our luggage isn't fully packed? Would suck.

 

[AlMc]

Exactly, but any chance of missing the boat because our luggage isn't fully packed? Would suck.

Agreed. Would you mind if I copy and paste just the 'letter portion' of your link to send to my guy with the name included of 'your guy'?

 

[SOULPEDL]

Would you mind if I copy and paste

Sure, no prob.

 

[ZsoZso]

While this is correct, my math says that the number of shares not going private is probably more than 35 million. I don't really know how much more, and I wish I had a better basis for guessing.

Yes, that number is the big mystery. I have seen you made some very good efforts at educated estimation for that and I appreciate it. However, I believe the number is not static, it changes dynamically every day depending on stock price as well as sentiment of the market about the future of private Tesla. The mass media hit pieces are trying to reduce confidence in Elon, but positive car reviews of model 3 coming out daily these days increase the confidence and so will positive Q3/Q4 results.

 

[SebastianR]

Sure, there are many shorts with options, but the fact remains that there are about 35 million shares shorted. Those are not options, they are direct short sales that must be covered before the stock is de-listed. If the number of long shares not going private is less than 25 million, then squeeze worse than VW will happen.

Big if. Look, I would love to say "well, there is a real possibility for this to get worse than VW" and my emotions scream "yes, TSLA will soar". But I very much doubt it. As I said, the element of surprise is gone. So I'm very sure that we will see a slow and gradual decline of short shares over the coming months. I'm very much aware and consider it possible for a short-covering rally to happen but I can't see a short squeeze.

While this is correct, my math says that the number of shares not going private is probably more than 35 million. I don't really know how much more, and I wish I had a better basis for guessing.

Exactly. And by this time I guess we are having a fair share of "going private arbitration" folks in the stock who would be very happy to sell at 425, 430, 450...

Of course, we might still live to see a huge surprise: I still can imagine that somebody slowly accumulates now, and all of a sudden we are 5-7 Million Shares short and have a nice squeeze. BUT I want to be clear that I see the likely hood of that happen at 10% or less: while I dislike shorts, I don't think they are stupid and many of them are not doing that since yesterday only.

I think the likelihood of this happening is small: it would require existing (big) players to go private, and other big player who are not part of the go-private-consortium (and thus who likely give up power. i.e. a seat on the board etc.) accumulate now, it would require that most private investors can&want to take their shares private etc.

@neroden: is there any way to estimate how many shares are sold short / held by market makers to hedge options et. al.? Would you think that unwinding this will affect the available shares significantly?

 

[winfield100]

i _think_ I read somewhere here about institutional investments in TSLA
Have the actual numbers of shares gone up or down? say since 5/31
(just point in correct direction)
these numbers are a bit confusing. How many shares do Institutions hold 98 million? 78 million? 91 million?
https://www.nasdaq.com/symbol/tsla/institutional-holdings

EDIT: OOPS, never mind, Inst holdings same as 1 year ago
understand it, ones who descreased, still own that many millions

 

[winfield100]

OOPs. never mind
https://fintel.io/so/us/tsla
same as May/june 2017

 

[neroden]

@neroden: is there any way to estimate how many shares are sold short / held by market makers to hedge options et. al.? Would you think that unwinding this will affect the available shares significantly?

There's no good way to estimate it.

 

[AlMc]

FYI, different response from TDA for me. See the main thread on this topic here Self Directed IRA discussion

Ref my post #33.

Agreed. Would you mind if I copy and paste just the 'letter portion' of your link to send to my guy with the name included of 'your guy'?

Sure, no prob.

So, I checked with my person at TD about the above discussion prompted by am email to @SOULPEDL from his TD guy about TD NOT allowing TSLAP in an IRA: My guy's response:

Al,

I just checked on this again, and was assured once again that we have in no way made a determination on whether or not you will be allowed to hold the shares. I apologize that you are getting different responses, but the response below is not accurate. I was told if TSLA goes private, we will evaluate it on a security level, as well as a client specific level, meaning there will not necessarily be a general rule, and there certainly has not been one put in place thus far. I rolled this response up to make sure this is not something our back office is continuing to tell clients, as this has not been decided on.


I’m sorry for vague response, but that is all we can say for certain at this point, and anything beyond that we be speculation. I will be sure to let you know if I get any other information on it and again apologize for the confusion.


Let me know if you’d like to speak more about it, or if you have any other questions.

 

[BrianZ]

I just thought of a method to create the short squeeze that seems far too simple and good to be true. Can someone poke holes in this plan?

We're talking about wanting to have a short squeeze, but that hinders on how many shares from institutional investors need to be bought out because they can't go private. If the number of shares that can't go private exceeds the number of shares shorted, then we have no short squeeze.

BUT, what if Tesla has a plan like this:

Tesla gathers up all the major institutional shareholders and figure out who wants to go private and who needs to be bought out. Once they figured out who needs to be bought out, whoever the investors are will buy the shares directly from the institutions that want out at $420, WITHOUT going through the stock exchange. Once they've done that, there will only be retail investors that needs to be bought out, which is far less than the 33 million shares shorted. Then, Tesla's privatization team will announce ALL institutional shareholders will be going private as all the institutional shareholders that want out are bought out already, and all institutional shareholder shares are recalled for voting, and we have an instant and gigantic short squeeze.

Of course, all of this hinges on if shares can be transferred without going through the stock exchange. Is that possible?

 

[AlMc]

I just thought of a method to create the short squeeze that seems far too simple and good to be true. Can someone poke holes in this plan?

We're talking about wanting to have a short squeeze, but that hinders on how many shares from institutional investors need to be bought out because they can't go private. If the number of shares that can't go private exceeds the number of shares shorted, then we have no short squeeze.

BUT, what if Tesla has a plan like this:

Tesla gathers up all the major institutional shareholders and figure out who wants to go private and who needs to be bought out. Once they figured out who needs to be bought out, whoever the investors are will buy the shares directly from the institutions that want out at $420, WITHOUT going through the stock exchange. Once they've done that, there will only be retail investors that needs to be bought out, which is far less than the 33 million shares shorted. Then, Tesla's privatization team will announce ALL institutional shareholders will be going private as all the institutional shareholders that want out are bought out already, and all institutional shareholder shares are recalled for voting, and we have an instant and gigantic short squeeze.

Of course, all of this hinges on if shares can be transferred without going through the stock exchange. Is that possible?

Here you go: An Introduction to Dark Pools

 

[BrianZ]

Here you go: An Introduction to Dark Pools

I knew something like this has to exist. Otherwise how do institutional investors sell or transfer large amounts of shares without moving the markets like crazy?

Now, we know this is doable. Any legal reason why this can't be done? This seems perfectly legitimate to me as long as the investors also push the market price to $420 right after they buy out all the institutional investors that want out in order to be fair for retail investors.

Then, BOOOOOOOOOOOOOOOOOM?

 

[winfield100]

I knew something like this has to exist. Otherwise how do institutional investors sell or transfer large amounts of shares without moving the markets like crazy?

Now, we know this is doable. Any legal reason why this can't be done? This seems perfectly legitimate to me as long as the investors also push the market price to $420 right after they buy out all the institutional investors that want out in order to be fair for retail investors.

Then, BOOOOOOOOOOOOOOOOOM?

it probably has less of a chance of succeeding if somebody starts suggesting it.
Go back and look at Vol and A/D lines and a few other hints.
Look at ALB from a few years back when a very large trade (over 1 million) at exactly 9:30 did something "funny" and ALB suddenly went up in price very nicely soon afterwards..
I suspect Tesla shorts are in for a very nasty surprise, as they reluctantly fund Tesla going private a _lot_ more and a _lot_ sooner than they expect, but back to lurk mode.
I know at least one short of around 9,500 shares who has closed out his shorts until October, but i'm just musing.....

 

[BrianZ]

it probably has less of a chance of succeeding if somebody starts suggesting it.
Go back and look at Vol and A/D lines and a few other hints.
Look at ALB from a few years back when a very large trade (over 1 million) at exactly 9:30 did something "funny" and ALB suddenly went up in price very nicely soon afterwards..
I suspect Tesla shorts are in for a very nasty surprise, as they reluctantly fund Tesla going private a _lot_ more and a _lot_ sooner than they expect, but back to lurk mode.
I know at least one short of around 9,500 shares who has closed out his shorts until October, but i'm just musing.....

Assuming my plan is legal, there is absolutely nothing the shorts can do to foil this plan even if they know this is exactly the plan. If this is indeed the plan, then no institutional shareholder will sell on the market, because they will get $420 from the investors instead of the current low $300's price on the market or sell to the shorts at short squeeze prices. The shorts are sitting ducks and there's nothing they can do to save themselves from the impending short squeeze.

 

[BrianZ]

Now I think about it some more. If this is indeed the plan, it puts a whole new meaning to Elon's tweet that shorts have 3 weeks before their shorts explode.

What he means by that tweet would be that this plan is going to be set in motion in 3 weeks, and once it starts, the shorts won't be able to do anything to stop it, and a short burn of the century is guaranteed.

 

[priscila]

There will be a squeeze of the shorts depending on the certainty of the deal going through. When it is 99% certain, that the deal goes through for 420$, nobody will want to sell below 420$...

Therefore, price will need to be higher than 420$ due to the shorted shares. It does not depend on whether there are more shares not wanting to go private than there are short. As long as there are "shorts" and 420$ is guaranteed, no one will see a reason to sell below 420$ hence stock price will surge higher than 420.

If, however, the process in the probability rising ("deal certainty") is very slow, shorts will cover slowly and shorted interest will slowly move down leading to no short queeze.

It depends therefore on the following things:

1) the surprise effect in rising the deal certainity (probability of the deal actually happening) - destroyed by Elon currently
2) the number of shares shorted
3) the timely horizon of the certainty rising
4) the number of shares wanting to stay private (as the deal probability rises, less shares will want to be sold below 420$)