Short-Term TSLA Price Movements - 2016

[Johan]

According to rules it doesn't make a difference whether you sell or buy. If you are a top level insider, you have to do it in certain window.

"so long as such persons do not purchase or sell such securities in violation of this Insider Trading Policy"

I'm sure Elon and his lawyers have taken this into account. I just wonder my self, how is this possible.

He hasn't bought on the open market, he has exercised options resulting in new shares being issued. That's not regulated by trading windows. When the stock option was issued that was reported to the SEC, along with all the conditions attached to it such as when he can and can't exercise it.

 

[bh1783]

Exercising them now makes sense since it minimizes his taxes. (this might signal a bottom for the stock price)

 

[uselesslogin]

Elon said "OK. Well, we're starting die-cast runs on Thursday at this time, here's where I'll be if you need to arrest me. And then we can talk about the 4000 jobs that will be idled because we don't have the parts we need." They got the permits they needed temporarily while zoning gets changed

This is exactly why I invest in Elon.

 

[Matias]

He hasn't bought on the open market, he has exercised options resulting in new shares being issued. That's not regulated by trading windows. When the stock option was issued that was reported to the SEC, along with all the conditions attached to it such as when he can and can't exercise it.

Ok. Thanks for the explanation.

 

[CHGolferJim]

That would be a very expensive signal. Stock price is at a 52 week low hence his tax bill is at a 52 week low. Anything can happen, though. I'll be very interested to see how and when he exercises the remaining 2.8 million shares this year. I'm not sure he has he cash available to cover the exercise price and taxes on all that, might have to sell some shares. I'm not sure how liquid he is.

Thanks for jumping in. In broad terms, why do you suppose the tax rate is so high ~50%? I've heard billionaires pay lower tax rates than secretaries......

 

[Julian Cox]

This is exactly why I invest in Elon.

Hopefully interesting and profound philosophical comment as we can finally look forward to the start of the 2016 rally:

Most people use their big brains to justify, evade or become expert in serving irrational fear, to induce irrational fears in others as a means of persuasion and to form bonds of friendship or collaboration with others based on commonality of a shared irrational fear. This goes right to the top to CEOs of large corporations and money managers managing financial risk and politicians and generals managing armies and nations.Musk made a life defining choice at a formative age to put his big brain above irrational fear in the hierarchy of importance. World of difference. The truth is invisible to a fearful mind however smart that mind is, can't use it to break out of a fear ecosystem only to find ways to thrive within it. This is why Musk's ventures are so radical and unanticipated (and so frightening) to many in positions of wealth and power, and yet they are simply logical ways to go after obvious improvements in the human condition that are obviously required. It's the lack of stupidity and BS that is so extremely rare because Musk's businesses are not the product of fear and almost everything else is.

 

[uselesslogin]

Thanks for jumping in. In broad terms, why do you suppose the tax rate is so high ~50%? I've heard billionaires pay lower tax rates than secretaries......

Billionaires pay lower tax rates than secretaries because of the long term capital gains rate and a similar low tax on dividends. So basically the dividends from their stocks are far greater than any salary they earn and therefore they have a lower tax rate than their secretary. Otherwise, ordinary income, which is where this is classified, is 39.6% federal for anything over $500k and I think someone said 13% California in another thread.

 

[gene]

I was unaware of any Model X making it to Europe. Here is one: Random Model X sightings - Page 143

 

[ggr]

He hasn't bought on the open market, he has exercised options resulting in new shares being issued. That's not regulated by trading windows. When the stock option was issued that was reported to the SEC, along with all the conditions attached to it such as when he can and can't exercise it.

Also, this is what the pre-arranged 10b5-1 "safe harbor" trading plans address. You can be exempted from the provisions of the quoted paragraph so long as you arranged the trade well in advance and documented it sufficiently, in other words, your insider knowledge couldn't affect the trade. These are what allow the "exercise and sell" trades that periodically spook people. But Johan's right, in this case that doesn't matter; he can exercise options and turn them into shares at any time.

 

[Johan]

I do believe Elon was in his right to exercise the option now, but he was likely restricted from selling the shares (as we're do close to the ER). I don't think he wanted to sell, regardless.

 

[Drax7]

Hopefully interesting and profound philosophical comment as we can finally look forward to the start of the 2016 rally:

Most people use their big brains to justify, evade or become expert in serving irrational fear, to induce irrational fears in others as a means of persuasion and to form bonds of friendship or collaboration with others based on commonality of a shared irrational fear. This goes right to the top to CEOs of large corporations and money managers managing financial risk and politicians and generals managing armies and nations.Musk made a life defining choice at a formative age to put his big brain above irrational fear in the hierarchy of importance. World of difference. The truth is invisible to a fearful mind however smart that mind is, can't use it to break out of a fear ecosystem only to find ways to thrive within it. This is why Musk's ventures are so radical and unanticipated (and so frightening) to many in positions of wealth and power, and yet they are simply logical ways to go after obvious improvements in the human condition that are obviously required. It's the lack of stupidity and BS that is so extremely rare because Musk's businesses are not the product of fear and almost everything else is.

very uplifting

 

[brian45011]

Are you sure it was 6.7 million shares? It looks like 3.4 million to me - is there another source?

Yes, From the 2011 proxy: Tesla Motors - Definitive Proxy Statement

In recognition of these achievements and to create incentives for future success, the Compensation Committee recommended, and the Board of Directors approved a grant to Mr. Musk of 3,355,986 options to purchase shares of our common stock at an exercise price of $6.63 per share representing 4% of our fully-diluted share base prior to such grant as of December 4, 2009, with 1/4 th of the shares subject to the option vesting immediately, and 1/48 th of the shares subject to the option scheduled to vest each month thereafter over the next three years, assuming Mr. Musk’s continued service to us through each vesting date.
In addition, to create incentives for the attainment of clear performance objectives around a key element of our current business plan — the successful launch and commercialization of the Model S — the Compensation Committee recommended and the Board of Directors approved on December 4, 2009, an additional grant to Mr. Musk of 3,355,986 options to purchase shares of our common stock at an exercise price of $6.63 per share totaling an additional 4% of our fully-diluted shares prior to such grant as of December 4, 2009, with a vesting schedule based entirely on the attainment of performance objectives as follows, assuming Mr. Musk’s continued service to us through each vesting date:

•
1/4 th of the shares subject to the option are scheduled to vest upon the successful completion of the Model S Engineering Prototype (Alpha);


•
1/4 th of the shares subject to the option are scheduled to vest upon the successful completion of the Model S Validation Prototype (Beta);


•
1/4 th of the shares subject to the option are scheduled to vest upon the completion of the first Model S Production Vehicle; and


•
1/4 th of the shares subject to the option are scheduled to vest upon the completion of 10,000 th Model S Production Vehicle.

 

[esk8mw]

Regarding the tax rate, the spread (current price less tiny 6 dollar exercise price) is immediately taxable at the top 39.6 federal rate plus state rate. Assuming he holds the shares for a year he'll get long term capital gains taxes on any additional appreciation from the exercise date price.

regarding the trading window, option exercises are still regulated by insider trading laws and their internal trading policy. Using cash to exercise is a bit of a gray area since you aren't selling shares back into he market. Regardless, the transaction was on the 27th and as I said, most companies start the blackout two weeks prior to earnings, so he's likely just under the wire in any event. He doesn't have a 10b5-1 that I know of, this would have to be disclosed on the website and in the proxy. Plus the form 4 usually references the 10b5-1 when the transaction was triggered by the plan.

- - - Updated - - -

Yes, From the 2011 proxy: Tesla Motors - Definitive Proxy Statement

In recognition of these achievements and to create incentives for future success, the Compensation Committee recommended, and the Board of Directors approved a grant to Mr. Musk of 3,355,986 options to purchase shares of our common stock at an exercise price of $6.63 per share representing 4% of our fully-diluted share base prior to such grant as of December 4, 2009, with 1/4 th of the shares subject to the option vesting immediately, and 1/48 th of the shares subject to the option scheduled to vest each month thereafter over the next three years, assuming Mr. Musk’s continued service to us through each vesting date.
In addition, to create incentives for the attainment of clear performance objectives around a key element of our current business plan — the successful launch and commercialization of the Model S — the Compensation Committee recommended and the Board of Directors approved on December 4, 2009, an additional grant to Mr. Musk of 3,355,986 options to purchase shares of our common stock at an exercise price of $6.63 per share totaling an additional 4% of our fully-diluted shares prior to such grant as of December 4, 2009, with a vesting schedule based entirely on the attainment of performance objectives as follows, assuming Mr. Musk’s continued service to us through each vesting date:

•
1/4 th of the shares subject to the option are scheduled to vest upon the successful completion of the Model S Engineering Prototype (Alpha);


•
1/4 th of the shares subject to the option are scheduled to vest upon the successful completion of the Model S Validation Prototype (Beta);


•
1/4 th of the shares subject to the option are scheduled to vest upon the completion of the first Model S Production Vehicle; and


•
1/4 th of the shares subject to the option are scheduled to vest upon the completion of 10,000 th Model S Production Vehicle.

i didn't catch this, thanks. So there were two sets of 3.3 million options, and all are vested and expire in December, probably. I say probably because he could have exercised the options before they went public, when there were no form 4 obligations. This is what I meant in my prior comment when I said their form 4s had errors, box 9 of table 2 is supposed to list all options beneficially owned, not just the options reported in the current form 4. That rule exists to avoid the sort of confusion I had there.

 

[sunhelm]

...11/7/2013 - Stock purchase @0 of 1,256 shares (Note on this was: Shares were received... part of the pro-rata distribution by VEP I effected on Nov 7, 2013 - Unsure what VEP I is, maybe someone else knows?)

Isn't VEP = Valor Equity Partners?

 

[sunhelm]

...Porsche decided to spend 1B to produce E-Mission(?),

It's actually Mission E but I think your typo was incredibly ironic that switching a tiny vowel from first to last also reverses the age old paradigm of a gas-spewing car to Zero!

 

[Lessmog]

Now, it were only that easy to transform to E-posh! :biggrin:

 

[mmd]

Posts from the event start here:
- Page 12
If they are making 200-250 MS per week, that's only 13-25 MX per week ?

Part of the line was visible and he said the mix of cars on the line there was representative of the current Model S and Model X build rates. Having watched the line fairly carefully every time it moved, I'd say that the ratio is 10-15 S for every 1 X right now.

If true, this means at 1000 MS a week (the usual rate), the MX rate is like 66-100/week. It's down quite a bit from 238/week at end of 2015. Glad that Elon got his options for production Model X vested!
What's interesting, is that the X line seems to take almost same time (or may be half) to produce just 1/10-th to 1/15-th of the MS line each week, as they are working 12 hours for 4 days a week in the MX line to produce the lower quantity. IMO, more capex will be needed in Q1 and Q2 on the MX line to boost production rate or improve quality.

 

[Julian Cox]

IMO, more capex will be needed in Q1 and Q2 on the MX line to boost production rate or improve quality.

I suggest you short the bejezus out of the stock. What could possibly go wrong. Fingers crossed eh?

 

[electracity]

If true, this means at 1000 MS a week (the usual rate), the MX rate is like 66-100/week. It's down quite a bit from 238/week at end of 2015. Glad that Elon got his options for production Model X vested!
What's interesting, is that the X line seems to take almost same time (or may be half) to produce just 1/10-th to 1/15-th of the MS line each week, as they are working 12 hours for 4 days a week in the MX line to produce the lower quantity. IMO, more capex will be needed in Q1 and Q2 on the MX line to boost production rate or improve quality.

If the MX is actually being built that slowly, the most likely reason would be a parts shortage from a vendor. If they rejected a parts shipment, it might set them back a few weeks to a month. Instead of running out of the part and stopping production, they might have rationed. Rationing would prevent the possible headline "Tesla Halts Model X Production".

Since real retail customers posses actual Model Xs, I doubt there is a fundamental problem here.

Although I expect Musk has considerably more respect for the difficulties of actual auto manufacturing today than he had five years ago.

 

[Zhelko Dimic]

I don't find this surprising, but I think I have a bit more info on this. I've read somewhere awhile ago interview with Panasonic CEO, where he was explaining how Japan's industry is stagnant and way too risk averse, and how he sees their relationship with Tesla as one of the ways to break cultural barriers. There was a lot more, but what I remember as a conclusion is that Panasonic decided to bet on Tesla as a way to elevate themselves, and grow into much different role. If I can offer an image, this reminds me of Tesla as a group leader that's tiny, and Panasonic big stupid Muscle behind that asks 'who do I do now boss, who do I beat?". Relationship is mutually beneficial.
CEO also commented that they haven't yet committed 1.6B at the time, but only 320M, and that rest will come if everything is ok.

Clearly, I believe Pan CEO is visionary of a sort, even if that's just enough to see Tesla as a leader and 15 GFs in the future. However, Panasonic is and will be careful with its money and will deploy it as long as Tesla is growing their production.

Few more thoughts: I'm sure Panasonic will be extracting decent profit from GF, even-though smaller than what they could do from Japan. It is also in Tesla's business interest to have Panasonic make some money - they need big muscle for a long play, and success is easier when you have friends and not only enemies. Also, the bounty is big enough that grabbing marketshare is first priority and fighting over few percents here or there is less relevant. Tesla wants Panasonic to have profits, so that shareholders and Board of Directors allow CEO to continue financing new GFs. You know they will need 'staggering' amounts of money? Well, better if someone else is raising some of that too. Tesla needs to change world, not make 100% profit of the whole e-car enterprise. Finally, in the spirit of changing the world, maximum attack speed is all important, as this will scare the rest of the industry to start working on electrification.

Germans are already on it, since Tesla started eating their lunch in 7 series class. Porsche decided to spend 1B to produce E-Mission(?), and negotiated salary cuts with workers for it(?) That's how much they're scared. Of course, the larger the company, the more they fumble, so it will take awhile for big ones to realize this is not just the threat, but mortal threat, as you described well.

In any case, race for second place has started.

One more thing re Panasonic- Tesla relationship.

Switching suppliers is not easy. Companies get connected on many levels, including many personal relationships. This creates bond of trust, dependability and predictability. You and your peers know who to call if there is any kind of problem. I imagine bonds are especially strong if you work on planet changing products.

You don’t switch suppliers and break such bonds willy-nilly. So Tesla has no reason to abandon Panasonic at any point. They can’t do everything themselves (they’ve chosen to create value by working on hardest problems) and friends are important.

I imagine many of traditional car-makers can become friends and get Tesla's help in transition to e-cars. If they get behind the mission. I imagine Tesla would rather take partial profits (by supplying batteries, drivetrains, engineering) to speed up mission rather than observe destruction of production capacity of it's rivals. Off course, some (many) will have to fail (or be severely downsized) anyhow.