Short-Term TSLA Price Movements - 2016

[FANGO]

At the risk of sounding like an Elon fanboy (I'm not, as you'll see in a moment), I'm seeing a lot of "reasoning by analogy" here. And any number of other logical fallacies. "This will happen because Elon is a supergenius and none of us can understand what he's thinking and his effort will singlehandedly bring upon the salvation of humanity and never bet against him because he always gets it right" type stuff. As you can perhaps tell, that is not my position, and it never has been. The reason I like Elon as boss of this company is because he's generally got his head in the right place long-term and we both see similar trends and how to capitalize on them - inevitability of clean energy and electric vehicles, mainly. So, anyone on the team whose head is in that same place, I'm on board with. As long as that's the focus, which is what I signed up for (as did we all, since it's the company's mission statement) when I put ~100% of my net worth into TSLA stock just after IPO, then that's great. The reason I think it's great is because it's necessary, inevitable, and as long as nobody else is doing it then we might as well make some money off of it.

So that's why this SCTY thing sounds good to me. I don't see a problem here. It fits the mission. I don't support it because Elon is some perfect being who's going to swoop in and save everything, or because he's the only person in the world who can make it work (good thing he isn't, because there's tens of thousands of people working at these companies who are superfluous were that the case), or because Elon succeeds at everything (nobody does, and hubris/overextension is real, that's why we still use a Greek word for it because it is such a constant in humanity). I do support it because it seems like a good idea.

As some people may or may not recall, I've certainly had my disagreements with things that Tesla has done in the past (including some I haven't voiced here), so I hope that people don't think I'm just defending the actions of a company that I think is always right. I don't think they're always right, but I do think they're right now.

 

[Papafox]

Anyone think shorts may pile on to-morrow since TSLA can't be shorted today?

According to a poster in the daily trading chart thread, the cost of borrowing TSLA shares to short jumped from 1.5% to 5% on Wednesday. Also noted right below that reference in the thread was a reference to the short tracking thread that there was a reduction in available TSLA shares to short from 1.1 Million to 293,000. So, yes, it looks like shorts have already jumped aboard and more could come, but they may in fact be limited by available shares.

This situation bodes well for a robust gain should 2Q delivery numbers be a beat.

 

[Johan]

I see it as 8 shares of SCTY will turn into 1 share of TSLA regardless of the price of either stock. So buying SCTY at 21.84 is like buying TSLA at 174.72. As long as TSLA stays above that number, the trade should be profitable, eventually. Am I getting anything wrong here?

Agreed. We should likely see TSLA and SCTY trading in tandem in exactly this relation as long as SCTY shares exist and as long as it looks like the deal is going through. The more we see the two stocks diverging from this 8:1 ratio it means the market is pricing in a higher risk of the deal not happening.

Since I believe there wouldn't be an announcement like this if it wasn't already a "done deal" in the sense that the board knows they have enough big shareholders on board a divergence from this 8:1 ratio would be a pure arbitrage opportunity, A kind of to good to be true situation, that would be quickly corrected/picked up by the market.

 

[Gerardf]

Another high volume day. Closing more-or-less at the same as opening.
If that was the best the shorts had, we might start to see some green tomorrow.

Max-pain at 205 for tomorrow.

.. Of course Much will be depending on the British referendum results that will come out tomorrow !

 

[Crowded Mind]

If the UFC is being sold for $4bln with annual revenues of less then a billion, how is it that Solarcity is a fair value at $2.7bln with $11bln dollars worth of revenue generating assets accumulating a 20% compounded growth rate? Maybe Solarcity should go private and sell then...

I'm not sure what this has to do with my post that you were quoting. Were you responding to another post?

 

[eloder]

Another high volume day. Closing more-or-less at the same as opening.
If that was the best the shorts had, we might start to see some green tomorrow.

Max-pain at 205 for tomorrow.

.. Of course Much will be depending on the British referendum results that will come out tomorrow !

Short selling restrictions are in place for today due to yesterday. This price action happened way below the indices without any help from the shorts at all--not a good short-term sign at all.

Definitely standing on the sidelines tomorrow, depending on Brexit and price action.

 

[Foghat]

Agreed. We should likely see TSLA and SCTY trading in tandem in exactly this relation as long as SCTY shares exist and as long as it looks like the deal is going through. The more we see the two stocks diverging from this 8:1 ratio it means the market is pricing in a higher risk of the deal not happening.

Since I believe there wouldn't be an announcement like this if it wasn't already a "done deal" in the sense that the board knows they have enough big shareholders on board a divergence from this 8:1 ratio would be a pure arbitrage opportunity, A kind of to good to be true situation, that would be quickly corrected/picked up by the market.

Much of Solarcity board are tesla centric investors/employees. They see this as a good deal because it benefits tesla significantly, however this is not a good deal for Solarcity investors at all. I think the big players which are overwhelmingly skewed tesla interests are looking out for Tesla's point of view far more then Solarcity's investors. Solarcity long investors understand what's happening here and it is not a fair deal as it stands now.

Survey any long Solarcity investor and you'll learn quickly these deal terms are an insult. Again, aquisition a great idea, the deal terms are not.

 

[dakh]

Elon mentioned bridge loans from Tesla to SolarCity if necessary until the deal is finalized. One more indicator that smells like a bailout. But as far as the transaction to acquire SCTY, my understanding is that Tesla just prints more shares. No cash changes hands. But obviously, this means some dilution to TSLA, similar in size to the recent cap raise at 215 combined with Elon's 5M stock options exercise.

Did we listen to the same call? He said he thinks they won't be needed but if the need arises scty won't be able to get them due to acquisition so Tesla would have to bridge the gap. He also said financial reporting will be kept separate as much as possible.

 

[Johan]

Furthermore, I believe those Tesla bulls who are now getting that eerie feeling of cold feet need to take a step back and see the bigger picture:

Tesla was always destined to be much more than Tesla Motors. The introduction of Tesla Energy with the PowerWall and PowerPack should have been a very obvious clue to this. It was always in the cards for Tesla to also have solar panel manufacturing, installation and complete integrated solar systems (including storage) within the Tesla entity. Yes, it's a very grand play they're making but how could a true Tesla bull be surprised?

In a few years the following will be reality: You can walk in to a Tesla store, or make an appointment online and get an offer from Tesla on a package that you can either buy cash or lease (fully or partly) that includes:
- a Tesla car
-solar panels on your roof (dimensioned either to cover all your electricity needs or only the car's consumption)
-a central unit with an integrated inverter (to make AC for the house), for most people some amount of stationary storage, probably also an outlet from which you can charge the Tesla car with DC straight from the solar panels or the stationary storage battery (thus skipping the round trip DC -> AC -> DC inefficiencies they normally occurs with solar panels and during car charging from the grid). Within this integrated system I think it's plausible they would allow for V2G, or rather vehicle-to-stationary storage charging.

Consider Apple's success, which is built on delivering products with great design, ease of use, very few bugs and failures thanks to them having full control of the hardware on which the software is running, lots of natural synergies (iPhone, iPad, calendars, iCloud, iMessage etc etc) that draw the customer deeper in to the Apple ecosystem of products. For all this people are willing to pay a premium which enables Apple to have huge margins on consumer electronics that, as the sceptics will typically say, "anyone could build".

In the same way I'm positive that yes, even though it's "just solar panels, an inverter, some batteries, some software and a car which anyone could build" that the value created by Tesla bundling all these things and integrating them tightly will create such an appealing package (with regard to everything from functionality, dependability, design, efficiency, ease of use etc) that customers will line up to buy and lease these packages. And even though Tesla will have great margins on it the customer will save money on these systems (as opposed to keep driving a gas guzzling and staying grid dependent) and will percieve very big value.

 

[Foghat]

I'm not sure what this has to do with my post that you were quoting. Were you responding to another post?

Responding to the fact there already is no premium... The value of Solarcity is significantly more then the deal offer suggests. If it was to give a premium I think is should be a longer term share average since the current range is at a multi year lower, not only a 12 month low range, but a multi year long low.

It's only fair to assess "market value" this way as most scty investors understand current history of events that have manipulated current "market value" into unreasonable/ non representative valuation. As I alluded to the UFC deal which could be seen as a massive premium to actual "market value" in the private company world, Solarcity might get a much better valuation as a private company hen what tesla is offering.

 

[Gerardf]

Short selling restrictions are in place for today due to yesterday. This price action happened way below the indices without any help from the shorts at all--not a good short-term sign at all.

Maybe you are correct. There seems some confusion around this. I have seen both messages of short selling restictions and of a strong decrease in number of shares available for borrowing today.

Daily TSLA Trading Charts
Quote :
"From the Tracking short interest thread, TSLA shares available to short reduced to 292,300 , down from 1,089,395 shares available on Monday from Fidelity. Shorts are more than doubling down!"


P.S. Johan, I noticed they leaked the name of the new generation SolarCity panels to you already :

" straight from the dollar panels"

Edit: added link and quote.

 

[stealthology]

Another high volume day. Closing more-or-less at the same as opening.
If that was the best the shorts had, we might start to see some green tomorrow.

Max-pain at 205 for tomorrow.

.. Of course Much will be depending on the British referendum results that will come out tomorrow !

Sorry, I'm being a little pessimistic, but the shorts couldn't short today, correct?

 

[Johan]

There seems some confusion around this. I have seen both messages of short selling restictions and of a strong decrease in number of shares available for borrowing today.

P.S. Johan, I noticed they leaked the name of the new generation SolarCity panels to you already :

" straight from the dollar panels"

I corrected it but yes, sometimes the phone's auto correct is prescient

 

[Drax7]

Much of Solarcity board are tesla centric investors/employees. They see this as a good deal because it benefits tesla significantly, however this is not a good deal for Solarcity investors at all. I think the big players which are overwhelmingly skewed tesla interests are looking out for Tesla's point of view far more then Solarcity's investors. Solarcity long investors understand what's happening here and it is not a fair deal as it stands now.

Survey any long Solarcity investor and you'll learn quickly these deal terms are an insult. Again, aquisition a great idea, the deal terms are not.

What about solarcity intrinsic value? That is book value, or book value minus
Intangible assets.

Eventually tesla will have to expense it all , charges against their income statement .

 

[Rarity]

Fidelity loaned out my TSLA shares today, so I'm not sure what short selling restrictions would be in place.

 

[Irishjugg]

Sounds right to me. Or let's use a really conservative scenario with half the P/E ratio, that would be $3 trillion. Not bad.

And yet some people still don't like this merger that lays the foundation for this market cap!? Beats me.

I can't figure out if you are being sarcastic very well or if this transaction has taken you to a place where you actually want to hold Tesla stock long now. My understanding was you were against being long TSLA previously, and possibly advocating a short position.

 

[Crowded Mind]

I can't figure out if you are being sarcastic very well or if this transaction has taken you to a place where you actually want to hold Tesla stock long now. My understanding was you were against being long TSLA previously, and possibly advocating a short position.

He's being sarcastic.

 

[dc_h]

He's being sarcastic.

Not

 

[Curt Renz]

Fidelity loaned out my TSLA shares today, so I'm not sure what short selling restrictions would be in place.

Shares could have been sold short today, if at a price higher than the current best bid, i.e. not by selling at the market price. A short seller would have had to enter a limit offering price, and a buyer would have had to accept it. An algobot could have more efficiently sold short a large number of shares under this restriction than a human.

To inhibit your brokerage from lending your shares, enter a good till cancelled limit order to sell at a very high price.

 

[Crowded Mind]

I see it as 8 shares of SCTY will turn into 1 share of TSLA regardless of the price of either stock. So buying SCTY at 21.84 is like buying TSLA at 174.72. As long as TSLA stays above that number, the trade should be profitable, eventually. Am I getting anything wrong here?

Agreed. We should likely see TSLA and SCTY trading in tandem in exactly this relation as long as SCTY shares exist and as long as it looks like the deal is going through. The more we see the two stocks diverging from this 8:1 ratio it means the market is pricing in a higher risk of the deal not happening.

Since I believe there wouldn't be an announcement like this if it wasn't already a "done deal" in the sense that the board knows they have enough big shareholders on board a divergence from this 8:1 ratio would be a pure arbitrage opportunity, A kind of to good to be true situation, that would be quickly corrected/picked up by the market.

I'm probably thinking of this incorrectly, but if there is no premium (arbitrage opportunity), then what incentive do SCTY shareholders have to vote for the offer?