OK, so this indicates that the go-private consortium would have to be ready to supply enough cash to pay off all the additional convertibles (Tesla's current set to pay them off as they come *due*, but certainly not set to pay off the 2021 and 2022 convertibles today) -- or a deal would already have to be arranged with the convertible holders.
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
- Status
OK, so this indicates that the go-private consortium would have to be ready to supply enough cash to pay off all the additional convertibles (Tesla's current set to pay them off as they come *due*, but certainly not set to pay off the 2021 and 2022 convertibles today) -- or a deal would already have to be arranged with the convertible holders.
If a deal with the convertible holders was already in the works we would have known about it. Too many different parties to keep that under the wraps. Financing includes offering to pay down all debts (around $11B or so)
Tesla's done private close-out deals with the larger convertible holders and not announced them until the 10-Q in the past.
So, here's a question. Do you think Tesla could accomplish these goals better by doing the following:
(1) Asking the options exchanges to stop listing options on Tesla
(2) Delisting from the major exchanges, trading only over the counter
(3) Remaining officially a "public company" for reporting purposes and SEC regulations
(4) Having liquidity events as previously mentioned
This would probably eliminate most of the short-selling activity, although it would still be theoretically possible to short-sell (it would become quite difficult, and most brokers would refuse to assist with it). It would eliminate the speculative short-term trading (no liquidity, no regular quotations). It would eliminate options-related speculation.
I'm not sure how many shareholders would be forced out by delisting and remaining a public company, but quite possibly fewer than would be forced out by going truly private.
(1) Asking the options exchanges to stop listing options on Tesla
(2) Delisting from the major exchanges, trading only over the counter
(3) Remaining officially a "public company" for reporting purposes and SEC regulations
(4) Having liquidity events as previously mentioned
This would probably eliminate most of the short-selling activity, although it would still be theoretically possible to short-sell (it would become quite difficult, and most brokers would refuse to assist with it). It would eliminate the speculative short-term trading (no liquidity, no regular quotations). It would eliminate options-related speculation.
I'm not sure how many shareholders would be forced out by delisting and remaining a public company, but quite possibly fewer than would be forced out by going truly private.
Most short-sellers borrow from brokers. Most brokers simply won't let you short-sell an unlisted company; they won't lend it to you. You can theoretically set up a personal private custom deal to do so, but you can't just sign into your brokerage account and punch "short sell". The supply of shares to short would be miniscule.
So, there is a great deal we don't know. This is a sui generis deal. But it has the most similarity to *tender offers*, which are often used to go private (but can be used for other purposes too).
So, tender offers can be kind of weird. It's perfectly legit to make a tender offer for shares at $420, even one which is conditional on various things (like a sufficient number of people signing up for it)... and then buy the shares and leave it at that. It's legit to make a second tender offer *later* for a *higher amount* to the people who didn't sign up for the first one.
I'm currently wondering if there will be a tender offer at $420 *regardless* of whether the full go-private deal can be executed. That would make sense to me -- resolving the entire details of the go-private deal could take a long time, but a tender offer could be launched quickly and would not in any way imperil the go-private deal (as far as I can tell). A tender offer, by itself, would have salutary effects on removing the short-sellers and noise traders from the market for TSLA shares.
So, tender offers can be kind of weird. It's perfectly legit to make a tender offer for shares at $420, even one which is conditional on various things (like a sufficient number of people signing up for it)... and then buy the shares and leave it at that. It's legit to make a second tender offer *later* for a *higher amount* to the people who didn't sign up for the first one.
I'm currently wondering if there will be a tender offer at $420 *regardless* of whether the full go-private deal can be executed. That would make sense to me -- resolving the entire details of the go-private deal could take a long time, but a tender offer could be launched quickly and would not in any way imperil the go-private deal (as far as I can tell). A tender offer, by itself, would have salutary effects on removing the short-sellers and noise traders from the market for TSLA shares.
Bet TSLA
Active Member
You come across as so risk averse it's a mystery to me why you are in TSLA on either side in any way.
Reading your post's remind me of listening to Sam Harris....I am running for my thesaurus to learn new words.
420 is the universal number indicating it's time to smoke some weed, people speculate that it's a Musk joke, is that only a wild association from some California based tech "journalists" or is there more to the story? If it was a legit joke you can speculate what kind of investors back a 72 billion dollar weed joke up ... the Saudis, the Chinese, some guy's in California hmm
There are a lot of (swing) traders who see an income crunch if Tesla goes private. Lot of people cut out. Motivated to stop the action.
Is it a leveraged buy out if current shareholders can retain shareholder value in new company by not being “bought out” when converted to a private company?
If shareholders can retain same value in the company after going private by owning the previously public shares — essentially doing nothing but holding onto what you already own— is this not something technically a wholey different legal structure?
We know the market value of the company at $420. If this is agreed to, then all employees and shareholders can clearly establish value of stake in the company which would just be a conversion of public to private company with understanding of when and how future equity issuing and sales will occur.
Seems since the outside valuation is clear, which is a major process all currently private companies undergo for their equity holders, and in Tesla’s case, it’s being done right now for current holders.
In essence this $420 valuation could be considered the first sale/buy period for equity holders in the private company.
This seems like something other than a leveraged buy out.
If shareholders can retain same value in the company after going private by owning the previously public shares — essentially doing nothing but holding onto what you already own— is this not something technically a wholey different legal structure?
We know the market value of the company at $420. If this is agreed to, then all employees and shareholders can clearly establish value of stake in the company which would just be a conversion of public to private company with understanding of when and how future equity issuing and sales will occur.
Seems since the outside valuation is clear, which is a major process all currently private companies undergo for their equity holders, and in Tesla’s case, it’s being done right now for current holders.
In essence this $420 valuation could be considered the first sale/buy period for equity holders in the private company.
This seems like something other than a leveraged buy out.
That's a fair observation. As you can imagine I am super well diversified and I have a strict limit on my exposure. Tesla is my second most risky investment. I would never have invested in the company, if I hadn't been convinced to try a model S a long time ago. The rest is history, I suspect like so many here? The irony is that I currently don't even own a car because most of my mobility needs are covered by bike or plane which is not even a 15 train ride from here.
Reciprocity
Active Member
Im sorry, but this 420 price is a serious problem. For one, it caps the stock at 420 from my point of view. The reason is that many funds will have to exit the stock before the deal is completed or wait until the deal is done at sell at 420, they will want to exit at the highest price so every time the stock goes above 420, it makes more sense to sell at that point rather then to wait for the deal to close. This is enough supply to cap the squeeze at just over 420. The deal must happen to force covering, otherwise they just wont cover.
Because the 420 is a cap, the shorts have a known loss that is 10% higher then today's price. They can short at will have almost no downside beyond the 10%. Clearly today's price action shows that shorts could get out at anytime.
Here is the worst part. Because the price is capped at 420, everyone who had long dated calls are crapped out. They are going to 0. As they go to 0, shorts can buy these calls for Squeeze insurance. They have already dropped to 1/4 the value before the stock was halted. What does this mean? If there is a squeeze, shorts can cash in the calls and clean house. If the deal fails to go through, they can also profit from the calls because they will return to normal values. If the stock price collapses because it turns out Elon never had any real funding, then they are going to clean house on the short position. Elon has basically gifted Shorts an out while screwing anyone who was long with calls.
If there is a squeeze, the shorts can sell the calls they bought for pennies on the dollar.
If there is no squeeze and the deal goes through, they can cover and the funds will bail them out.
If there is no deal and the stock stays elevated, then the shorts can add to their short and mop up profits on the calls as they return to normal.
If the SEC finds an issue with the announcements or there is an issue with the funding, shorts will get bailed out by the stock price dropping to 200.
I dont know what Elon was thinking, but this is absolutely terrible for anyone who was long Tesla with options and a complete bailout for shorts smart enough to buy insurance.
Because the 420 is a cap, the shorts have a known loss that is 10% higher then today's price. They can short at will have almost no downside beyond the 10%. Clearly today's price action shows that shorts could get out at anytime.
Here is the worst part. Because the price is capped at 420, everyone who had long dated calls are crapped out. They are going to 0. As they go to 0, shorts can buy these calls for Squeeze insurance. They have already dropped to 1/4 the value before the stock was halted. What does this mean? If there is a squeeze, shorts can cash in the calls and clean house. If the deal fails to go through, they can also profit from the calls because they will return to normal values. If the stock price collapses because it turns out Elon never had any real funding, then they are going to clean house on the short position. Elon has basically gifted Shorts an out while screwing anyone who was long with calls.
If there is a squeeze, the shorts can sell the calls they bought for pennies on the dollar.
If there is no squeeze and the deal goes through, they can cover and the funds will bail them out.
If there is no deal and the stock stays elevated, then the shorts can add to their short and mop up profits on the calls as they return to normal.
If the SEC finds an issue with the announcements or there is an issue with the funding, shorts will get bailed out by the stock price dropping to 200.
I dont know what Elon was thinking, but this is absolutely terrible for anyone who was long Tesla with options and a complete bailout for shorts smart enough to buy insurance.
I do think options traders suffer big time. But, that seems to be the point. Options have become a huge problem of incentivizing pump and dump behavior which has is a detriment to growing a business and detracts from the focus of the whole reason a company exists: creating a product consumers want; creating a customer for your product (ref: P. Drucker)
Last edited:
I disagree with your base premise. I think the $420 guarantee (if the deal goes through) increases the likelihood of non-going-private sellers using high ask prices to maximize profits. Everyone knows the shorts will have to cover/ buy, so why settle for $421?
- Status
Similar threads
- Locked
- Article
