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jkirkwood001
Active Member
The difference between $350 and $420 is directly proportional to a) the people who don't believe Elon, along with b) the people who doubt the $420 deal will get through (either because of regulatory restriction or shareholder rejection).
In other words, the $420 is not guaranteed. All us longs believe it will, and keep climbing (talk of 2,000 targets makes my head spin!), but remember this is still, today, a company that hasn't turned a sustainable profit and owes $20 B (think I'm close on that figure). Sceptics still exist, hence the gap.
dmckinstry
Model X 2019
JRP3
Hyperactive Member
Higher price might force him to increase the offer.
Reciprocity
Active Member
Lets think about this a second. The price is approaching 400 as the board approves the deal and vote occurring becomes more and more certain, but could still fail the actual vote so the bulk of shorts do not cover. After the vote happens, the shorts all rush to cover. The price would rise to 420 almost instantly because of the vote, the value is set. But the short covering pushes the price over 500 and those who are staying decide to start selling as well, to good to pass up.
Now lets say the investor is Tencent (already owns 5%) and they are willing to buy 30% of the company, which does not cause any issues because they dont control the company. The squeeze forces shorts to BUY shares but not to own them. They BUY them to return them to the original owners, which are you and me and the institutions. Lets say this action drives the price to 800 or 1000 and people start selling to short sellers who need to cover. These folks where staying but decided to sell because the price went up so high and now the number of shares that need to be purchased from Institutions and others that must sell are 46%, so Tencent buys 46% to add to their 5% for 51%.
Obviously this is a crazy theory and highly unlikely because the institutions that must sell would have already started selling above 420 and would suppress the squeeze. The question i still have is how much supply exists for Institutions that MUST sell vs those who will stay. Institutional owners at the biggest segment by far and most of the loaned shares are actually theirs. If that supply is larger then the short squeeze demand then there wont be a squeeze. If the opposite is true, you could see some people who intended to stay, start selling to further suppress the squeeze though at a higher level. 35 Million shares short, but that number could be much lower by the time the vote happens, they should start covering as soon as funding is identified and the board is clear to approve the deal, since they are fully owned by Elon. This could cause the squeeze to actually be before the vote.
The Level of complexity here is about a billion times more then I can fathom. Whats clear to me is that the amount of share that to buyout is lower then most are thinking because many of the institutions have ways they can own private shares, if this is the case and many decide to stay, then the squeeze could indeed occur, but it might be limited by the those who find the new crazy high levels more appealing then staying, which could also blow up the deal due to both price and the size of the number of people who need bought out as a percent of the total. Remember that shorts have to buy at the exploding prices just to return them to the owner, no new owner is created. In some cases those owners selling their shares triggers a recall in the shares borrowed and must be instantly covered, without warning to the short. This could be self fulling perpetual machine that could in fact blow up the deal before its done. If the number of shares shorted is higher than the the number looking to or required to bail, then the squeeze could be epic though it would be blunted a bit those enticed by the new rates.
Interesting to note that Index funds cannot bail no matter how high the price gets, they must stay in until the price is 0 after the conversion. I have no idea how much of the institutional funds are index funds. ETFs as well are just baskets of stocks, so they wouldnt necessarily sell, but could re-balance automatically? Selling the stock that tippled in a squeeze to increase the balance the rest of the shares in the ETF. Does this happen automatically or does it happen on a quarterly basis or what? I have no clue.
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Post all shorts covering, what would the SP be though? Would anyone be buying at the high end, or only selling to the low end (419.99 bid).
I think this is where you start to go off the rails. Most large holders are required to vote their shares which means they have to be recalled before the vote. So if the board approves the deal most shorts are likely to be forced to cover prior to the vote.
Are we in a classic prisoners dilemma?
If no one sells, the stock price basically goes to infinity. But we know many if not most have GTC orders. If everyone sets their GTC orders to 1000, then we all profit at 300%. But if we all set GTC orders to 5000, then we all profit 1500%. All the longs have to agree to to set some ridiculous GTC and we can take the shorts to the homeless shelter while getting rich. TSLA should probably issues some shares themselves to take advantage.
If no one sells, the stock price basically goes to infinity. But we know many if not most have GTC orders. If everyone sets their GTC orders to 1000, then we all profit at 300%. But if we all set GTC orders to 5000, then we all profit 1500%. All the longs have to agree to to set some ridiculous GTC and we can take the shorts to the homeless shelter while getting rich. TSLA should probably issues some shares themselves to take advantage.
Reciprocity
Active Member
I get that, but we have had votes in the past and the recall didnt cause a squeeze. Is it possible that the lenders do not recall all their shares to vote in those cases? You say they are required to recall all of their shares. Why didnt the last vote cause a short squeeze?
McMountain
Member
Brokerage goes after their assets after liquidating all their positions.
In at least one case wasn't the record date prior to the announcement such that they couldn't have known to recall their shares for the vote?
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But what happened, if the sheer size of short position (13B$) goes bankrupt. Will this disrupt market?
Brokerage takes the hit in the short term, could mess them up badly depending on exposure (could hedge with options), so they (knowing this) will crank up the margin requirements ahead of time.
The Blue Owl
Endangerous Herbivore
Entertaining being a better description than informative, I think...
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Matt Levine:
That is honestly exactly the termsheet that I've been expecting since the first tweet came out, so I think this does fit with the spirit of the transaction that Musk tweeted about...
The key is of course who's financing it. It doesn't need to be $80 billion, obviously, but he really does need to have $20-$40 billion in at least loose verbal commitments to buy at $420. Better if he also has a number of the larger investors lined up who have already agreed to keep their stock.
I just have no trouble believing that those commitments exist given the frankly huge list of possibilities. Maybe it's the Saudis. If it's the Saudis, that would explain why he's not sure whether shareholders will approve!!!
That is honestly exactly the termsheet that I've been expecting since the first tweet came out, so I think this does fit with the spirit of the transaction that Musk tweeted about...
The key is of course who's financing it. It doesn't need to be $80 billion, obviously, but he really does need to have $20-$40 billion in at least loose verbal commitments to buy at $420. Better if he also has a number of the larger investors lined up who have already agreed to keep their stock.
I just have no trouble believing that those commitments exist given the frankly huge list of possibilities. Maybe it's the Saudis. If it's the Saudis, that would explain why he's not sure whether shareholders will approve!!!
Reciprocity
Active Member
No buyers would drop the price until buyer came in. There is some scarcity that will be caused by Tesla going private. So you could see people willing to buy at above the 420, just to get into the private company. But how much? No one knows.
Through my mongo colored glasses, I took that tweet to meant that a vote is a necessary requirement, not that it had a questionable outcome.
It's like the steady prices are quantized at $5 multiples. To me this says no-one really knows what to do.
I was less than impressed and only mildly amused. There are plenty of reasons Elon could have for not wanting to reveal who the backers are, and he doesn't have to. It all comes down to credibility; does the board believe he's serious or not, and I have to think that they would believe him. Not because of magic beans but because of reusable rockets and Model 3s.
I was less than impressed and only mildly amused. There are plenty of reasons Elon could have for not wanting to reveal who the backers are, and he doesn't have to. It all comes down to credibility; does the board believe he's serious or not, and I have to think that they would believe him. Not because of magic beans but because of reusable rockets and Model 3s.
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