Short squeeze update

[Nicu.Mihalache]

This is just partial data, as institutions have started reporting position as of end of March. This is an ongoing process and Nasdaq.com has already made addition / accounting errors in the past.

But if we believe them, here is the situation: there are 2.7M shares missing from the free float, that is, even if all retail investors would sell, institutions could force shorts into a short squeeze (this is not going to happen this way, because they are happy with the hefty interest they receive on lent shares)

I have started following this situation more than 18 months ago:
Tesla: The Looming Short Squeeze - Seeking Alpha

But the timing has proven to be waaay too hard to evaluate. I had about 950 cheap (most of them bought @ 5c) call options expired in January - all of those were waiting for the short squeeze - now I'm on much more modest amount, but they are ITM J14 calls.

 

[deonb]

But if we believe them, here is the situation: there are 2.7M shares missing from the free float, that is, even if all retail investors would sell, institutions could force shorts into a short squeeze (this is not going to happen this way, because they are happy with the hefty interest they receive on lent shares)

They may be happy with interest, but they're not going to be happy with accounts driven over margin, since they'll end up holding the bag... That's unlikely given the current state of the market, but couple a general market correction with good news from TSLA at the same time, and that situation may change.


I think the timing is more likely now than it was in January. First of all, shorts are already down 50% since then. Then there are 4 potential catalyst points coming up:

1) The service-related announcement later today. Most likely not a big deal, and more likely than not will even depress the stock for a little while after.

2) The upcoming SuperCharger network announcement. Positive news in this area (e.g. progress made on charge time / roll out / execution) can give the stock a spike.

3) The earnings announcement on May 8th. We know Tesla will announce its first profit. Question is how much, and more important - what is the guidance for the next quarter. A positive outlook (e.g. overall profitability guidance for FY 2013) and long-term short holders will have to give up - even if the stock is now overvalued. It just needs to show that it has a solid base of e.g. $35, which makes most shorts underwater, so you have to pay 50% interest for your privilege of just trying to minimize losses...

4) The May 18th option expiration date itself which will remove air cover for a lot of shorts. They may try to get more air cover at a later date, or just give up and cash in.

 

[Nicu.Mihalache]

Those January calls I had accumulated over a long period of time when cash was flowing in waves from my AAPL calls. If I would have had the same flexibility since January, I would be in a better position to welcome the squeeze. Now I just have to work with whatever I have on board

- - - Updated - - -

1) The service-related announcement later today. Most likely not a big deal, and more likely than not will even depress the stock for a little while after.

Yep, I think it may cool down a bit. I'll try to cash in some spreads by that time

2) The upcoming SuperCharger network announcement. Positive news in this area (e.g. progress made on charge time / roll out / execution) can give the stock a spike.

Not sure long term improvements will meaningfully improve short term moves.

3) The earnings announcement on May 8th. We know Tesla will announce its first profit. Question is how much, and more important - what is the guidance for the next quarter. A positive outlook (e.g. overall profitability guidance for FY 2013) and long-term short holders will have to give up - even if the stock is now overvalued. It just needs to show that it has a solid base of e.g. $35, which makes most shorts underwater, so you have to pay 50% interest for your privilege of just trying to minimize losses...

If I remember correctly, they only give guidance for revenue, not for EPS. I think we will see guidance for 2013 revenue and reiterated goal of 25% by the end of the year. I think the sell on the news will be significant after the earnings CC, except maybe if they announce a tsunami of new reservations and / or production of 600 cars / week achieved and increasing.

 

[Enadler]

If I remember correctly, they only give guidance for revenue, not for EPS. I think we will see guidance for 2013 revenue and reiterated goal of 25% by the end of the year. I think the sell on the news will be significant after the earnings CC, except maybe if they announce a tsunami of new reservations and / or production of 600 cars / week achieved and increasing.

agreed but I also feel margin improvement in Q1 is key. They have to prove that they are on track for the 25% goal.

 

[NigelM]

Mod Note: the whole Peteresn discussion (which was most of this thread!) went here - Nonsense-from-John-Petersen

Also note guys that there's a fair amount of borderline snippiness in that last exchange I moved, I'm happy that no-one crossed the line but let's just remember to stay civil please.

 

[RABaby]

Cmon, a little snippiness shows they're human. It makes it fun reading. It shows passion and sensitivities. If it gets insulting, there are remedies, but nobody needs to be warned about their tone. This is a far more civil and useful board than so many I read where it turns to total political nonsense with no substance and absolutely no value. A little irritation keeps everyone on their toes with regards to presentation.

 

[Citizen-T]

Cmon, a little snippiness shows they're human. It makes it fun reading. It shows passion and sensitivities. If it gets insulting, there are remedies, but nobody needs to be warned about their tone. This is a far more civil and useful board than so many I read where it turns to total political nonsense with no substance and absolutely no value. A little irritation keeps everyone on their toes with regards to presentation.

It's that way for a reason. We've got good moderators.

 

[kenliles]

It's that way for a reason. We've got good moderators.

+1. Just a little snappiness OK. More than that is just what leads to nonsense. A warning at just a little is perfect call. Good job

 

[NigelM]

Thanks for the nice comments, now back on topic before we have to start moving stuff again.

 

[FredTMC]

This is just partial data, as institutions have started reporting position as of end of March. This is an ongoing process and Nasdaq.com has already made addition / accounting errors in the past.

But if we believe them, here is the situation: there are 2.7M shares missing from the free float, that is, even if all retail investors would sell, institutions could force shorts into a short squeeze (this is not going to happen this way, because they are happy with the hefty interest they receive on lent shares)

View attachment 20804

I have started following this situation more than 18 months ago:
Tesla: The Looming Short Squeeze - Seeking Alpha

But the timing has proven to be waaay too hard to evaluate. I had about 950 cheap (most of them bought @ 5c) call options expired in January - all of those were waiting for the short squeeze - now I'm on much more modest amount, but they are ITM J14 calls.

This chart of shares held looks way wrong for the major VPs/execs at TM. For example, how can Gilbert Passin only have 553 shares? I guess this data doesn't show how many options each exec has. Grants would be in this list (I think), but probably not options.

 

[Nicu.Mihalache]

This chart of shares held looks way wrong for the major VPs/execs at TM. For example, how can Gilbert Passin only have 553 shares? I guess this data doesn't show how many options each exec has. Grants would be in this list (I think), but probably not options.

Here is the history of insider trades
Tesla Motors, Inc. (TSLA) Insider Trading Activity (SEC Form 4) - NASDAQ.com

Many insiders exercise their options and sell immediately (to the grief of some investors). If you have another source of information, I would gladly try to integrate it.

 

[FredTMC]

Here is the history of insider trades
Tesla Motors, Inc. (TSLA) Insider Trading Activity (SEC Form 4) - NASDAQ.com

Many insiders exercise their options and sell immediately (to the grief of some investors). If you have another source of information, I would gladly try to integrate it.

Thanks! My point wasn't about the number of shares "traded" by insiders. I was simply commenting on the number of shares and/or options held by the execs. I haven't seen info on numbers held by execs but I'm sure the execs have a lot. That's their incentive for joining TM.

 

[Nicu.Mihalache]

Thanks! My point wasn't about the number of shares "traded" by insiders. I was simply commenting on the number of shares and/or options held by the execs. I haven't seen info on numbers held by execs but I'm sure the execs have a lot. That's their incentive for joining TM.

Oh, I should have stressed that the rightmost column is "Shares held" after each transaction. That's where I got those numbers from.

 

[NigelM]

Many insiders exercise their options and sell immediately (to the grief of some investors).

This has been covered before, but senior management has options which auto-execute as part of their remuneration package(s).

 

[Nicu.Mihalache]

This has been covered before, but senior management has options which auto-execute as part of their remuneration package(s).

Yep. Do I have to state everything with 100% accuracy as I have to do for a math theorem? Is there a presumption of guilt that is installing here around my posts? I hope not...

 

[Krugerrand]

Yep. Do I have to state everything with 100% accuracy as I have to do for a math theorem? Is there a presumption of guilt that is installing here around my posts? I hope not...

I don't think so, but it's always best to be choose your words wisely and be as specific as possible. People have a wide range of comprehension skill and ability, so if you take out the guess work, reading between the lines and such, you're less likely to be misunderstood. :smile:

 

[NigelM]

Yep. Do I have to state everything with 100% accuracy as I have to do for a math theorem? Is there a presumption of guilt that is installing here around my posts? I hope not...

Nobody's accusing you of anything; you posted that many insiders execute their options and sell immediately, I was just pointing out that senior management on the option remuneration plan have no control over this, it's automatic.

 

[brianman]

Yep. Do I have to state everything with 100% accuracy as I have to do for a math theorem? Is there a presumption of guilt that is installing here around my posts? I hope not...

Just an observation...
I think you're overreacting here. Nigel's post simply pointed out something of interest regarding the data. He didn't spank you with a ruler or anything.

That said, thanks for the chart. Numbers are often helpful for converging a discussion.

 

[Nicu.Mihalache]

Nobody's accusing you of anything; you posted that many insiders execute their options and sell immediately, I was just pointing out that senior management on the option remuneration plan have no control over this, it's automatic.

I just wanted to check that we are not in some kind of opposition here. I remember explaining the same thing (automatic sales, announced well in advance) to someone who was lamenting in numerous threads on SA that se is selling his TSLA over this. As any kind of motive was not the subject of my previous comment, I let some sloppy formulation go through, that's all