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Keep in mind that I advocate with TSLA keeping your options with lots of room before expiration. With the apparent bottleneck in production and the current full-court-press by shorts, I took advantage of the Monday morning rise to sell some J19s and will deploy into J20s.
Model 3 is a superb vehicle that will carry Tesla into the mega-growth that we need to reach our investment goals. We will see very substantial positive cash flow in 3Q, which may send TSLA quite a bit higher, but if there is a weakness anywhere, that jump in value is not guaranteed. I prefer to keep my bets far enough in the future to avoid short-term volatility.
Model 3 is a superb vehicle that will carry Tesla into the mega-growth that we need to reach our investment goals. We will see very substantial positive cash flow in 3Q, which may send TSLA quite a bit higher, but if there is a weakness anywhere, that jump in value is not guaranteed. I prefer to keep my bets far enough in the future to avoid short-term volatility.
They are going to have to do something about delivery communications. My wife's partner was in Boston visiting family for the weekend, but he had been told he had to pick up his Model 3 on Sunday from Devon, so even though he drove to Boston with his wife he was going to fly to Philly and then Uber to Devon for the pickup just because he has waited so long for his 3 he was afraid they'd give it to someone else. But when he called them Saturday he had to yell at them before they told him his 3 was damaged so it would be a couple more weeks before he would get his car. Someone should have called him to tell him the status of his delivery or at least have been honest when he called them before he had to escalate things. And he is someone my wife has never heard be angry or loud. This has to get fixed fast and they will soon have to start scaling up delivery service all over the world and hire competent people to work with customers.
Today was day three of the stalemate between longs and shorts where shorts try to push the SP down and cap it there and longs buy under 300, break the caps, and bring the SP close to 300. The net result is that the SP has hardly budged the past three trading days. Thursday and Friday included the impact of many 300-strike calls expiring that week and an additional incentive for shorts and sellers to keep the SP under 300, but today was clear of that factor and yet the dynamics remained much the same. Today was another low volume day for TSLA with mostly negative macros (see NASDAQ chart below).
The day began with a dip that quickly turned into a climb as the normal Monday morning buying exuberance kicked in. The shorts saw the morning buying show weakness, and so they began the selling and managed a steep dip to a little above 294 around 11:40ish. Note that at 11:09am we saw 57,000 shares sold in a minute to enable that steep dip. Note, too, the NASDAQ shows no similar dip at that time. Nonetheless, buyers quickly returned the price to 298ish. Then came an attempt at a small push-down and capping at about 297, but it did not hold and the day ended in a game of whack-the-mole. To get an idea of the quantity of short-shares likely covered at end of day, I see 264,000 shares trading hands in the final minute of market trading.
The NASDAQ began low but managed to climb into the green after 3pm
Shorts sold 58.16% of TSLA today, a noticeable decline from the previous three days but still at a very high level.
To shine light on the stalemate, consider the views that are common in the short-seller community:
* Elon Musk is either going to jail or will tweet the pedo guy again and be removed by the board
(longs typically see this is a very remote possibility, and so perceived likelihood is extremely different between longs and shorts)
* Tesla already has problems finding buyers for RWD Teslas and will exhaust the backlog of Performance orders soon
(longs recognize that a great number of Model 3 buyers changed orders from RWD to AWD when the dual motor vehicles became available and although there's work ahead to match buyers with RWD 3s, there's adequate demand in North America to absorb the surplus plus when Tesla starts shipping to Europe in Q1, a whole continent of P3D buyers begins to be addressed)
* Tesla is going bankwupt in early 2019 when the convertible bonds come due
(longs suspect price recovery of TSLA will reduce the necessary cash payments vs. stock payments to bondholders, but longs also feel confident that Tesla will be generating hundreds of millions of dollars cash every quarter from Q3 onward, which will allow Tesla to pay cash to all bondholders, if needed).
* Tesla's Model 3 output is not even 4,000 M3/wk and production is FUBAR. Tesla won't be profitable at these production rates.
(longs are concerned about production rates but know that there was enough of a carry-in of M3s from Q2 that Tesla has the ability to be profitable if it can substantially reduce the carry-over into Q4. Longs know that quarterly positive cash flow will be hundreds of millions greater than profits. Burst at the factory (such as 2300 vehicles in 2 days which works out to be 8,050/wk for S,3,and X, which can be looked at as 6K/wk M3 and 2k/wk for S&X, which is excellent. If you transfer 1k/wk of that production to S & X, the revenue only gets better. Rather than production being FUBAR, there is some bottleneck or a few bottlenecks that will be cleared up and then numbers accelerate quickly).
Because of these views by shorts, they are likely to continue unusually high levels of effort between now and Q3 production and delivery date, and so I'm less optimistic today about hitting 310 by then than I was last week. I also suggest that shorts will be looking at Q3 and Q4 as one or two quarter exceptions before Tesla goes back to losing money. Longs disagree, but if profits are too skinny or non-existent in Q3, shorts could make some headway in convincing the market of their beliefs. For this reason, I am personally taking an investment position of maintaining my substantial presence in TSLA through the Q3 production and delivery numbers but avoiding a bet on anything in 2018 or too early in 2019, just in case the market sides with the shorts. In that case, Tesla would need to get production well above 6K/wk and demonstrate profitable gross margins before the market could come around, and I prefer being an investor to a gambler. OTOH, if Tesla flies upward in October, my holdings will be substantial enough that my bases are covered for the upside. I will become more aggressive with some medium-term calls when I see the production numbers of Model 3 above 6K/wk and some improvement in the delivery situation.
Conditions:
* Dow down 181 (0.68%)
* NASDAQ up 6 (0.08%)
* TSLA 299.68, up 0.58 (0.19%)
* TSLA volume 4.8M shares
* Oil 72.08, up 1.30 (1.84%)
* Percent of TSLA selling by shorts: 58.16%
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Agreed, these type of communication problems are all too common at Tesla. When Elon said we're in delivery logistics hell, I really think he understood that the communications system regarding deliveries was part of that delivery logistics hell. The problems are too numerous for upper management to not know this is a trouble area. Sorry to hear the story.
I *really* hope so. I've seen upper management have... blind spots... before.
But logistics is almost entirely about communication, so it would be hard to recognize logistics hell without recognizing that communications was the problem...
I am starting to look at deliveries for the last week in September. The numbers are so high when you look at the intended deliveries at various delivery centers that they would substantially impact profitability if a majority of deliveries come through. That's a big if because there's a limit to what existing staff can handle and limits to available trucks, trailers, and drivers to haul the vehicles from Fremont to the various delivery centers. I'm turning my attention this week from production to deliveries. Hoping to have something useful to report before the week is over.
This will be a quick report. Today was day four of the stalemate between longs and shorts. Early on, shorts were able to make a symbolic gesture of closing a few pennies down on such a day, but lately, the longs have taken control of the closing and we've now seen three slightly green days in a row. As with yesterday, there was money to be made by shorts as they drove the early morning buying down from being up several dollars to the typical cap near 297 before losing control (as usual) in late afternoon. Interestingly, at 3:27pm buyers grabbed 44,000 shares in a minute to end the red streak. Whether it was a big-ass bull doing some of his own buying or a strong reaction by bots is not clear, but the buying changed the day for the better.
55.61% of TSLA selling today was by shorts. This decrease in selling trend suggests shorts are tiring of efforts to force the SP down.
The really interesting question right now is "what will deliveries be for Q3" Shorts are smug with recognition that M3 has had a recent bottleneck and is below 5K, possibly below 4K/wk, and they're realizing there are delivery issues. Looking at various delivery centers, I count at least 12,000 deliveries hoped for this week, which would truly have a positive effect on the SP next week. The big question is whether the big deliveries are caused by previous delivery bottlenecks or if they are related to more vehicles being made available than we anticipated. I'll be trying to get a handle on this end of quarter rush to determine if it is something good or something not-so-good. With Kimbal Musk telling us recently that we'll be blown away by the number of deliveries in the end of September, that comment suggests to me that something good is happening. More as soon as I can get a better feel for things.
Conditions:
* Dow down 69 (0.26%)
* NASDAQ up 14 (0.18%)
* TSLA 300.99, up up 1.31 (0.44%)
* TSLA volume 4.4M shares
* Oil 72.02, down 0.26 (0.36%)
* Percent of TSLA trading by shorts: 55.61%
Sudre
Active Member
I think shorts are saving ammo until after the delivery report. From there they will call out the high numbers with all cars being net losses because of.... blah blah blah. Then they will dump large amounts of shares. Hopefully failing to effect the SP because of massive buying. Oh and an announcement of rumored charges against Elon.
I just saw Ihor Dusaniwsky's latest short chart on twitter. Does it seem to anyone else like past numbers have changed? I'm sure the previous chart I saw had shares shorted peaking over 35mill. I'm hoping its a typo on one side or the other, but if not then we need to question how concrete the source of his numbers are.
It's safe to say the stalemate at 300 between shorts and longs has now been resolved in favor of the longs. Factors leading up to today's breakthrough for longs included:
1) Four days of descending short percentage of TSLA selling (suggesting shorts not as enthused about manipulations as a way to make money)
2) Decreasing short interest
For shorts to effectively push TSLA lower, it is very much a team sport with critical mass of shorting needed to make it happen and overpower the buyers. Unfortunately for shorts, not only have we seen less manipulation by shorts (constantly descending percent of selling) but we have also now seen the beginnings of short covering. The other ingredient needed for effective short manipulations is dread or uncertainty in the buyers. Although there's some uncertainty about where the Q3 numbers will fall for production and deliveries, the biggest contributor to dread lately has been a lack of certainty about the cause of the bottlenecks preventing M3 production from being higher. Today in this Bloomberg article, Panasonic's chief calls a battery shortage the reason for the bottleneck and says that the three lines of cell manufacturing equipment will be added sooner than the end of the year. The statement from Panasonic not only identifies the bottleneck but suggests the solution is coming earlier than expected, which is a positive to the market.
Notice that TSLA took quite a dive just prior to close. Two possibilities exist. First, the market knew that Papafox predicted 310 last week as a price leading into October's report, and when the SP rose too far the market quickly corrected to be consistent with the Papafox forecast. The second possibility, which I begrudgingly think is about 1000 times more likely, is that the Fed Chairman announced a rate hike, which caused the broader markets to dip at day's end, and TSLA followed the market's lead (see chart below).
The NASDAQ had a positive day until the Fed Chairman announced a rate hike near the end of market trading
Shorts did 49.96% of TSLA selling today
Take a look at these two charts by Ihor Dusaniwsky. The one on the top is from Sep 18 and the lower one is from today. Notice the very large discrepancy in short interest in September between the two charts. In the past, we haven't seen such big disparities in charts. I'll be watching closely with future charts to see if such large corrections happen again. Let's assume that the bottom chart is closer to reality (because it is newer) and you can see the beginnings of covering in the chart. Note that the top chart showed over 35M shares sold short and the lower chart never got much over 34M for the same time period. We're starting to see covering, but it is much less than suggested by the top chart.
Looking at the tech chart, you can see how really consistent the market's gains from lower bollinger band to upper bollinger band has been. When I said "We're on our way to the upper bb", I swear I didn't mean TSLA would be climbing slowly and the upper bb would be descending viciously in order to join. In any event, TSLA touched the upper bb today but descended and closed below both the upper bb and the 50 DMA. I suggest that the upper bb will need to rise some for another big day to occur before the Oct P&D report, but if the numbers are good on the report, that news is so substantial that the upper bb would not be a factor and we'd see another situation where the upper bb is rising fast to keep up with the SP.
Conditions:
* Dow down 107 (0.%)
* NASDAQ own 17 (0.%)
* TSLA 309.58, up 8.59 (%)
* TSLA volume 7.7M shares
* Oil 72.14, up 0.58 (0.80%)
Fact Checking
Well-Known Member
I've created an overlay of the two graphs, to better visualize the discrepancy:
It's pretty damning: while the price line matches perfectly, the short interest data changed on the 8/15 date, retroactively done sometime late September, and the data changed significantly. No explanation was given for the discrepancy.
My guess: their algorithm was changed after integrating the latest short sales transaction data (which is a monthly report) and the short sales interest data (which is bi-weekly), which retroactively changed their estimate.
The last four bi-weekly NASDAQ short interest reports were issued with settlement dates of 7/31, 8/15, 8/31 and 9/14. Note how the 8/15 settlement date matches the starting date of the deviation on the charts.
Particularly problematic is how the two charts disagree even about the basic trend of short interest development, with a magnitude of 2 million shares.
I'm afraid this is going to make their data a lot harder to trust.
Bastards couldn't wait until Friday to do this.
The SEC is Suing Elon Musk
So will good delivery numbers counter this?
The SEC is Suing Elon Musk
So will good delivery numbers counter this?
There was nothing really exceptional about today's market-hours trading, so let's go straight to the SEC suit and what it's doing to the SP after hours. The SEC is suing Musk for securities fraud related to his going private tweets in August. Here's a PDF of the suit. The SEC alleges that Musk did not have funding secured for the privatization when he tweeted and makes several other claims. They provide a very one-sided view of the matter and it was almost as if Mark Spiegel and Jim Chanos were standing beside them as they made the allegations. The SEC is seeking a fine, and a barring of Musk from being a director or officer in any public company, among other penalties. It is likely that the barring for life penalty is an attempt to get Musk to settle the matter so that the SEC, with its limited resources, doesn't have to go to court against Musk's expert legal team.
Elon issued a statement not long after the SEC suit. Here's Elon's response:
Knowing what I do about Elon, I'd say his response is honest and in character.
I am not a legal scholar and will not try to predict the outcome of this suit. The suit certainly has its weak points regarding intent, Elon's lack of stock buying immediately before or after this event, etc. On the other hand, Elon likely did not meet the full definition of what the SEC thinks in necessary before he could say "funding secured", and I'm sure that the SEC will be hanging a suit against Tesla over Elon's head in order to get a settlement. My guess is that we do eventually see a settlement for a lesser charge and when that happens there will be a relief rally, but the timing of such events is a big question mark and the SP will have a cloud hanging over it until this matter is cleared.
If you have dry powder, should you be buying today or tomorrow? I would urge caution, due to the fact that the SEC may be planning a suit against Tesla as well, which could add further downward pressure on the SP. The other side of the argument is that the results from the Q3 production and deliveries report could send TSLA quite a bit higher from where it's going on Friday. The problem with this plan is that the shorts know there is now some dread in longs, due to the SEC suit, and they will try to do what they did in the Q3 16 deliveries report and ER, which is to chip away at the gains at a rather quick clip because of the dread in the air about the November vote on the SolarCity acquisition.
The suit does put pressure on Tesla to deliver in Q3 and Q4. Here's why. The convertible bond that comes due in early 2019 can be paid with cash or stock. If the SP is low, you will typically see holders taking cash and if it is high you will see more holders taking stock. There are prices below which the payment is in cash and prices above which the payment is in stock. Maybe someone can chime in with details. The point I am making is that a low SP in early 2019 would suggest more cash payments, which would put more pressure on Tesla's cash balance. For this reason, it's important that Tesla move the vehicles and generate lots of cash in Q3 and Q4 to have a suitable cushion to pay off the bonds in cash, if that's needed. The shorts, of course, will look at this situation as a reason to jump in and we can expect a dip on steroids tomorrow as shorts add to the selling. Many are clueless about the strong reversal in cash flow that Tesla is about to see, and they'll sell in on the news.Expect to see the SEC 10% loss circuit breaker on short-selling tripped, which will put some restraints on the short-selling.
Looking at the technical chart, we can see that TSLA touched the upper bollinger band but now is going to take a big cliff-dive due to news. The lower bb is around 270 right now, which can be useful in explaining why the stock in after-hours trading has been gravitating to this area.
Never a dull moment around here. Again, try to avoid playing your calls with too little time value because TSLA is an extremely volatile stock. You want to preserve your investment for the truly significant climbs that will come in the future.
Conditions:
* Dow up 60 (0.23%)
* NASDAQ up 55 (0.69%)
* TSLA 307.90, down 1.68 (0.54%)
* TSLA volume 4.1M shares
* Oil 72.21, up 0.09 (0.12%)
* Percent of TSLA selling by shorts: 50.16%
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Here are a few thoughts for what may transpire on Friday.
* The talking heads at CNBC are going to stir the armchair shorts into a lather and some will jump in.
* I checked the NASDAQ short circuit list for Thursday and TSLA wasn't on it, meaning that after-market trading does not count
* Because TSLA's circuit breaker has not popped yet, the worst mistake that shorts could make is to push the stock slightly below the 10% loss point and then have the uptick rule in effect for the rest of Friday and Monday
* So, if 307.90 was Thursday's market hours close, a drop of $30.79 would activate the short selling restrictions. 307.90-30.79 = 276.93
* I hear that Tesla's board has given a big vote of confidence to Elon. That sentiment will encourage longs tomorrow, but it might bring the SEC that much closer to filing a suit against Tesla, as well. The plot thickens.
* The talking heads at CNBC are going to stir the armchair shorts into a lather and some will jump in.
* I checked the NASDAQ short circuit list for Thursday and TSLA wasn't on it, meaning that after-market trading does not count
* Because TSLA's circuit breaker has not popped yet, the worst mistake that shorts could make is to push the stock slightly below the 10% loss point and then have the uptick rule in effect for the rest of Friday and Monday
* So, if 307.90 was Thursday's market hours close, a drop of $30.79 would activate the short selling restrictions. 307.90-30.79 = 276.93
* I hear that Tesla's board has given a big vote of confidence to Elon. That sentiment will encourage longs tomorrow, but it might bring the SEC that much closer to filing a suit against Tesla, as well. The plot thickens.
One correction to your circuit breaker calculations, @Papafox:
I believe the circuit breaker will be set at 10% below the market open price, not previous close. So we'll only know at 09:30. But assuming the current price holds, and market opens around $270, the circuit breaker should be set around $243.
I really hope we dont hit that breaker.
I believe the circuit breaker will be set at 10% below the market open price, not previous close. So we'll only know at 09:30. But assuming the current price holds, and market opens around $270, the circuit breaker should be set around $243.
I really hope we dont hit that breaker.
@papafix is referring to the no-shorting Uptick rule (sec rule 201) which is based on previous closing price.
As you mentioned, daily stock breakers are based on day's trading (trigger limits are doubled pre 9:45 and post 3:35).
Circuit Breaker
Fact Checking
Well-Known Member
So in the Q2 conference call Elon announced that they are going to pay those convertibles in cash:
Elon Reeve Musk - Tesla, Inc.
Yeah, our default plan is we pay – we start paying off our debts. I don't mean refi-ing them, I mean paying them off. For example, there's a convert that's coming due soon, a couple hundred million, $900 million, something like that. We expect to pay that off with internally generated cash flow.
Yeah, our default plan is we pay – we start paying off our debts. I don't mean refi-ing them, I mean paying them off. For example, there's a convert that's coming due soon, a couple hundred million, $900 million, something like that. We expect to pay that off with internally generated cash flow.
Deepak Ahuja - Tesla, Inc.
And still be – still have a healthy cash balance.
Elon Reeve Musk - Tesla, Inc.
Yeah.
And still be – still have a healthy cash balance.
Elon Reeve Musk - Tesla, Inc.
Yeah.
The reason they are doing this is to avoid the dilution by the ~2.5 million shares that would be issued otherwise.
So Tesla wants to pay off the debt, and note that according to the convertible notes prospectus they can do so regardless of what the share price is - even if the note holders ask conversion in shares. If note holders ask to be paid in shares then Tesla can pay the cash-equivalent of those shares - and there's an expensive hedge they have with a large financial institution that is going to pay the difference between the $920 cash value and whatever value a higher stock price generates in cash payments.
I.e. from the point of view of shareholders this is the best possible outcome.
Also note that according to the financial modeling done by @luvb2b in the following thread:
Tesla, if they meet guidance, will most likely have plenty of cash in March 2019 to pay off their convertibles.
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