Short-Term TSLA Price Movements - 2016

[vgrinshpun]

Sort of. After setting the record date, and after the record date has pased, the company mails out the proxies, they have to arrive, they have to give people a week or two to send them back. Usually takes about a month, sometimes less. But companies are actually allowed to set record dates in the *past*.

I am trying to reconcile this with the following quote from the research article published in Journal of Corporate Finance titled "The Market for Shareholder Voting Rights Around Mergers and Acquisitions: Evidence from Institutional Daily Trading and Voting" (free pdf download). It appears that although state laws do not require disclosure of the record date until the date have passed, the Institutional Investors are notified 20 days in advance according to the SEC rules.

"Firms establish record dates, meeting dates, and the contents of proxies and prospectuses according to the laws of the states in which they are incorporated.(7) State law requires firms to disclose this information, but typically not before record dates have passed.(8) Investors therefore are usually not notified directly by firms of meeting information before record dates. Under SEC Rule 14a-13 firms are required to notify broker and bank recordholders at least 20 business days before record dates (or less if impracticable) of this information,(9) but are not required to notify investors. Stock exchange rules require that firms notify the exchanges of record and meeting dates at least ten days before record dates,(10) but again do not require that firms tell shareholders more generally. Thus firms are not required to notify investors of record dates and the contents of proxies and prospectuses until after record dates. In our sample, we find that definitive proxies and prospectuses, which include final dates and specific merger information, were almost never filed before record dates. Institutional investors, however, typically know record dates in advance, because they subscribe to shareholder voting services that gather record and meeting dates from the NYSE and other sources.(11) In contrast, retail investors usually do not subscribe to such services and therefore do not know record dates in advance."

According to the above it appears that although there is no requirement to notify investors about the record date, the 10 days notification is required to the Exchanges, and 20 days notification is required for Brokers and Banks.

Based on the above Institutional investors should have 20 days advance notice of the record date, allowing them to complete recall of shares, as/if desired.

 

[dc_h]

I have a 52-year old Ph.D. field in international economics from a well-regarded practitioner but I've never taught the subject and only used simple terms when teaching general courses in international relations. So what follows is not authoritative and bear in mind I've strung together insights from several forests to raise questions about a particular tree. Like saying a beech is, of course, just a pile of sand, no?) That should be warning enough not to tread further.

Following on earlier discussion of the disconnect of TSLA price and rationality, complexity adds to our understanding of why markets seem irrational.

Via Mark Thoma:

Complexity and Economic Policy

For whatever its worth Alan Kirman argues explanations based on individual behavior fail completely to capture the behavior of the whole for complex interacting systems like the economy. I would say the phenomenon applies to the market as a whole as well as the behavior of any widely traded stock.

At first blush one might conclude with artificial intelligence, deep learning, or machine learning, this puzzle might be solved and perhaps it is given the sophistication and rapid responses of high frequency traders. But there remains no clear understanding of what the machine is doing. See, for example, the difficulty researchers are having in teaching computers to talk.

Technology Review Alumni - September October 2016 - 32

Also there is this from Larry Summers, courtesy of Thoma:

Disappointed by what came out of Jackson Hole | Larry Summers

Most of his argument is understandable to a novice like me, except for the final paragraph where a negative is completely confusing:

“If a greater than 1/3 chance of a rate increase in September was not in markets, the cost of credit for small business would be lower and mortgage rates would decline. Employers would be more confident about hiring. And pressures would be removed from emerging markets. The world economy would be more robust.”

It seems Summers is using markets to predict what will happen to interest rates, emerging markets, and the world economy, the reverse of what is possible because of complexity.

In any case, I don't see the logic of why he concludes what he does here although I agree a dovish response was needed given his earlier caveats. Paul Krugman has been saying for some time not to increase rates until "you see the whites" of inflation's eyes. Can anyone help?

First off, a beech is a tree. A beach is a body of sand with water on one side and some inland topography on the other.
Regarding inflation and interest rates, there are many technologies and cultural issues containing inflation, as well as some financial and fiscal overhang from the Great Recession. Normally fiscal policy would have loosened or adjusted to meet changing economic demands. Gridlock has kept that process at bay. The oil vs renewables battle is also dampening price pressures. Add demographic issues in China, Japan and Europe, as well as Russia, that will limit growth in industrialized countries for decades and you have very limited pricing pressures.
Those are just my thoughts.

 

[Intl Professor]

...there are many technologies and cultural issues containing inflation, as well as some financial and fiscal overhang from the Great Recession. Normally fiscal policy would have loosened or adjusted to meet changing economic demands. Gridlock has kept that process at bay. The oil vs renewables battle is also dampening price pressures. Add demographic issues in China, Japan and Europe, as well as Russia, that will limit growth in industrialized countries for decades and you have very limited pricing pressures.

Couldn't agree more and I'm sure you include under "technologies" the advent and supply of oil due to fracking. You would probably also agree that the Middle East which has always been a mess, has gotten much worse because of the Iraq War which propelled the impact of the "Arab spring." But these complications and personal ambitions of Erdogon and Putin (whose popularity on opposition to Ukraine is solid) complicate matters and probably hurt all economies as well.

But I still don't understand what Summers meant in his last paragraph.

“If a greater than 1/3 chance of a rate increase in September was not in markets, the cost of credit for small business would be lower and mortgage rates would decline. Employers would be more confident about hiring. And pressures would be removed from emerging markets. The world economy would be more robust.”

Is he just saying in a backhanded way that the Fed is wrong based on the markets' expectations. Is he saying raising rates will mean small businesses will have higher borrowing rates along with mortgages, employers will lose confidence in the need for more workers, and pressures will increase on emerging markets while the world economy will falter even further. That would be logical to me, but then that's kind of econ 101 simplicity. Perhaps I'm just too stupid to understand this is a semantic problem because of his negative phraseology. But there remains the relationship between the individual factor and complexity, which he seems to reverse by using the complexity to derive causes. That is way beyond my ability to comprehend and I know that Ilya Prigogine and others well versed in exploring complexity admit they can never predict when a "bifurcation point" will occur. Time for bed now.

 

[ev-enthusiast]

I'm probably adding some core shares if this lazy drift down continues below 210 or so. I missed the last chance at 208 and wished I bought more then.

Always appreciate your posts, Sir.
Especially like your sell target reached posts.
You have been spot on a couple of times!

Good reminder to not let emotions reign trading decisions. Buying low selling high usually helps trading a lot more than panic selling/buying.

 

[ev-enthusiast]

Model X finally arriving in Tilburg in significant quantities. Will be interesting to watch European registration numbers soon.
No issue with 100kWh battery, will be a retro fit in Europe.

 

[Hogfighter]

Couldn't help myself. Bought more yesterday. Too much production occurring to stay on the sidelines. 400,000 preorders provides a nice base that wasn't there when the stock fell in previous eras.

 

[schonelucht]

July was the month of "we don't know why price goes up", August is the month of "we don't know why price goes down". Let's hope for a clearer (and better) September.

 

[W84M3]

215, the price of second offering, broken....

 

[CALGARYARSENAL]

Believe.....lol. The longer I invest the less I care about daily fluctuations. This will happen for years to come.

 

[vgrinshpun]

Shares available to short went down further by an additional 8K (for a total drop of 50,897 shares), to 173,416 shares available in the last half hour of trading.

Available to short shares at Fidelity are down from 173,416 at the market close yesterday to 67,837 as of 9:47am today (105,579 shares reduction). Estimated Annual Interest rate remains 13%

 

[aznt1217]

Available to short shares at Fidelity are down from 173,416 at the market close yesterday to 67,837 as of 9:47am today (105,579 shares reduction). Estimated Annual Interest rate remains 13%

The spring is loaded. In the short term, we need for the company to deliver cars like crazy. I'm not worried about sales/demand or manufacturing as much. Getting keyfobs into people's hands is what will matter most.

 

[Quesder]

The spring is loaded. In the short term, we need for the company to deliver cars like crazy. I'm not worried about sales/demand or manufacturing as much. Getting keyfobs into people's hands is what will matter most.

I believe there is someone from TMC sitting in front of the Fremont watching the delivery. How is Tesla doing in August?

 

[Drax7]

A quarter above 24,000 car deliveries will restore Teslas credibility.
Credibility will restore the stock price.

12 weeks at 2000 cars per week = 24,000 produced .
Assuming q2 undelivered = q3 undelivered for simplicity sake

Then q3 deliveries = 24,000.

That's bullish because it gives the stock holders tangible support.
24000 deliveries is about $2.4 billion in sales, with gross profit of
About .5 billion.

Achieving 26,000 deliveries in q4 is feasible as production increases up to 2400 / week.

In the meantime this data point is unknown, there are doubts concerning
Production and demand. This data point is critical to restoring the bullish
Case in the short term in my view.
More importantly , the market does not care what I think, so I have
To navigate With cognitive dissonance.

 

[FredTMC]

A quarter above 24,000 car deliveries will restore Teslas credibility.
Credibility will restore the stock price.

12 weeks at 2000 cars per week = 24,000 produced .
Assuming q2 undelivered = q3 undelivered for simplicity sake

Then q3 deliveries = 24,000.

That's bullish because it gives the stock holders tangible support.
24000 deliveries is about $2.4 billion in sales, with gross profit of
About .5 billion.

Achieving 26,000 deliveries in q4 is feasible as production increases up to 2400 / week.

In the meantime this data point is unknown, there are doubts concerning
Production and demand. This data point is critical to restoring the bullish
Case in the short term in my view.
More importantly , the market does not care what I think, so I have
To navigate With cognitive dissonance.

Drax, thanks for your post. We've been on TMC many years and I respect your opinion.

My view on Q3 is 21k deliveries would be a great number.

If you parse Tesla's guidance from last ER for Q2, they said "around 50k" for 2H and didn't provide any estimate for Q3.

"Around 50k" means 50k isn't likely...

Elon/Tesla clearly has a habit over last few years of providing very optimistic guidance. This seems to be Elons nature... Wall Street already recognizes this.. Therefore, the market will be okay with less than 50k.

 

[Drax7]

Thank you Fred, your point is very valid.
A built in disappointment allowance has been
Institutionalized by now because
The long term objective remains intact,
Near term projection misses are less relevant as long
As the actual production/demand trajectory is up.

If 21,000 works all the better.

Let us see By how much the market is willing
To see beyond the valley.
Price action will give us a clue to where the bottom
Is.
A closing stock price above the previous day's high price
Usually punctuates a bottom. This has not occurred
In weeks.

 

[racer26]

Tangentially related: Elon Musk on Twitter

Looks like SES-10 will be the first re-flown Falcon 9 stage. T-about 6 weeks, 3rd F9 launch from today (Amos-6 [Sep 3] and IridiumNEXT [Sep 19/20] are ahead of SES-10 in line.)

 

[Jayjs20]

Therefore, the market will be okay with less than 50k.

Pardon me for saying this, but it sounds like you're setting yourself up to be upset by future FUD articles.

 

[maoing]

Any negative news today? TA chart look ugly without news. I'm afraid the SP won't stop falling until substantial negative catalysts out. It's not the time to bottom fishing yet IMO.

 

[bonaire]

Pardon me for saying this, but it sounds like you're setting yourself up to be upset by future FUD articles.

How is 50k in H2 guaranteed? Especially if 21k is hit in Q3 using strong selling tactics, such as calling M3 reservations to try to get them to consider MS60 now, dumping classic-look P90DL for big savings and cheap leases, calling 5-seat MX reservations to upsell at 1/2 price the options to get a 6/7 seat made now?

I think the quiet guidance adjustment will be on the inability to deliver any 5-seat or coil spring Model X saying 'we have "10,000+ reservations" for the 5-seat and cannot deliver during 2016.'

 

[MartinAustin]

Also tangentially related (and somewhat puzzling)
Nikola Motors ditches battery-powered semi, looks to hydrogen
I think Nikola Motors just excused themselves from the world stage.