Short-Term TSLA Price Movements - 2016

[Drax7]

The big assumption is that "the largest shareholders are absolutely for this". I don't think this is necessarily the case. Minds change all the time. (Note: I think most of the largest shareholders were for it earlier on but later filings showed a lot of what I call the "dismalness of SCTY" and that's changing people's minds.)

If the largest shareholders were truly absolutely for this, then this would cause no stress on Elon as it would be a done deal. But obviously (as evidenced by Elon's own words this past Sunday), it's causing him a lot of stress due to the flak and it shows that there are a lot of significant institutional investors who are against this deal or are becoming increasingly belligerent toward the deal's prospects.

Another factor is look at the SCTY's share price... If TSLA's at $200, SCTY should be at $22 (due to the 0.11 stock swap offer by TSLA). But it's significantly lower. Why? Investors on the Street are well connected and the stock is $17 (and not $22) because of two reasons:
1. SCTY's finances are dismal (and most of that info was disclosed after TSLA's initial offer, thus the drop after).
2. There's a high risk of SCTY bankruptcy if the deal doesn't go through (due to SCTY finances being so dismal).
3. There's a decent chance the deal doesn't go through. If the deal was 99% going through, then there wouldn't be such a large difference ($17 vs $22), as institutions would be buying up SCTY to get a huge discount on TSLA. But big institutions/funds are well-connected and they recognize there's a good chance (ie., 20-50%???) that the deal won't go through.

I regretfully feel the same way.

 

[GBleck]

Thanks for the write-up Dave. I'm not sure I agree, but your position is very understandable and persuasive. Can't argue with it!

You could argue the flack for solar city was the dive in tsla share price.

 

[dha]

Count the SoCal Edison storage project as one more thing that could tip sentiment in favor of the deal. Shows that Tesla Energy is real with a massive opportunity before it.

 

[schonelucht]

About that. Didn't SCTY recently secure ~$300 million from a George Soros fund?

It's better than nothing but at a cost of capital that's above their discount rate. That goes directly to the heart of the argument that SolarCity as a standalone company does not have the confidence from the market to carry their debt burden.

 

[schonelucht]

Count the SoCal Edison storage project as one more thing that could tip sentiment in favor of the deal. Shows that Tesla Energy is real with a massive opportunity before it.

How so? That project is something Tesla won standalone and it has no solar component at all.

 

[madodel]

A car service that will only have Tesla Model Xs.
Morgan Freeman's driver launches Tesla-only black car service

Edit: Actually some Model S with mostly Model X and all with Ludicrous.

 

[racer26]

The whole process is like peeling a band-aid off excruciatingly slowly.

I'm long both TSLA and SCTY. My stake in SCTY is almost entirely because I believe in Musk and the long-term vision, and it acts as a proxy for cheap TSLA. My investment goal right now is to take the proceeds of my house sale (a mid 5 digit number) and grow it by enough to pay for my Model 3 with the profits in 12-18months time. I figure I have to be pretty aggressive to achieve that.

You could argue the flack for solar city was the dive in tsla share price.

You certainly could. Elon's personal net worth has dropped by about $1.5B between Jul 25 and the start of this week, ignoring whatever impact Amos-6 had on the value of SpaceX. I'd be pretty bent out of shape too, if my net worth dropped by over a billion dollars on news of something I'm certain is a good idea.

(Based on most recent Form 4 for TSLA, Elon owns 31,100,644 TSLA shares, and most recent Form 4 for SCTY he owns 21,845,674 SCTY shares, and a peak price of $234 for TSLA, trough of $194, peak of $27.50 for SCTY, trough of $16.77)

 

[Turing]

Big investors don't pass up on a blatantly obvious 28% arbitrage gains if it's anything remotely close to low risk. Just my opinion on it, I doubt I'll put more than a thousand or so if I do decide to jump in on this play.

Are big institutional investors allowed to talk to each other about how they will vote? If they aren't then this could increase uncertainty even if most of them are voting for it.

 

[EnzoXYZ]

I don't think the "flak" Elon is getting is from the media. The media just writes articles and regarding an acquisition, the media really doesn't matter much. It's the investors and large stakeholders that matter, and those are the people that are giving "flak" to Elon. If it was just one or two of the institutions, I don't think it would bother Elon. But it appears that there is significant resistance among institutional investors to the acquisition. Also, you can look at investor sentiment around this deal by looking at both TSLA and SCTY's stock prices. Both are down since the acquisition process started. And most notably, SCTY is down way below TSLA's offer price. I think some people here think that the merger is obviously going to happen, and think buying SCTY is like buying TSLA at a discount. But that in my opinion is ignoring the fact that institutions are not buying SCTY, even though it's lower than TSLA's offer price, due to high risk... and that risk is the possibility of the merger not going through and SCTY going bankrupt. Sure, that possibility might not be over 50%. Heck, it might not be over 20% (even though I think it is). But, I definitely think it's larger than the 1-5% some are assuming.

For my sake I hope your wrong or way off. Would really suck! The farm foreclosed in a nanosecond.
Appreciate the different point of view.

 

[Intl Professor]

I'm not at all sure Elon checks his net worth daily. I check our portfolio multiple times daily because I'm a nano cent on the dollar investor by comparison.

 

[Turing]

I don't think the "flak" Elon is getting is from the media. The media just writes articles and regarding an acquisition, the media really doesn't matter much. It's the investors and large stakeholders that matter, and those are the people that are giving "flak" to Elon. If it was just one or two of the institutions, I don't think it would bother Elon. But it appears that there is significant resistance among institutional investors to the acquisition.

But this assumes institutional managers aren't influenced by the near universal financial media negativity around the deal. Also, many of these institutionals also own solarcity. It would also be pretty terrible for solarcity to implode before a national election and have enemies of green energy turn it into another solyndra political football to kick around for months.

 

[SunCatcher]

A question. Please don't hate me, as I'm one of Elon Musk and Tesla's biggest fans.

Would Tesla really be wanting to buy Solar City if Musk wasn't so heavily invested in it?

It's just an innocent question. I love you Elon, but… really?

Tesla is building it's own Gigafactory, why not build its own solar business from the ground up… who needs the handicapped baggage?

 

[GBleck]

Any word on the details in the grandfathering of solar power rates in nv this week?

 

[GBleck]

A question. Please don't hate me, as I'm one of Elon Musk and Tesla's biggest fans.

Would Tesla really be wanting to buy Solar City if Musk wasn't so heavily invested in it?

It's just an innocent question. I love you Elon, but… really?

Tesla is building it's own Gigafactory, why not build its own solar business from the ground up… who needs the handicapped baggage?

Proprietary panel ip and a sweet ass deal from nj state on the factory. They basically pay nothing for the building.

 

[Jayjs20]

A question. Please don't hate me, as I'm one of Elon Musk and Tesla's biggest fans.

Would Tesla really be wanting to buy Solar City if Musk wasn't so heavily invested in it?

It's just an innocent question. I love you Elon, but… really?

Tesla is building it's own Gigafactory, why not build its own solar business from the ground up… who needs the handicapped baggage?

MAN THE PITCHFORKS.

But seriously, if I had to guess, I imagine it'll be easier for Elon to handle because it's already a company he knows the in's and out's of. He'll need an solar "wing" in Tesla eventually, so why not use the one he already has much influence over already. Tesla and Solarcity are basically sister companies anyways.

 

[JBRR]

Tesla responds to Mobileye’s comments on Autopilot, confirms new in-house ‘Tesla Vision’ product

God I love Electrek
Has become my 1>>>>>> source of Tesla info.

 

[Papafox]

I'm the one reporting zero earlier and it was zero at that time. Just like it was 9k when @stealthology reported it.

Thanks NOLA_Mike, I was coming to this conclusion as well. Still, I had hoped that all short shares that were returned to IB would be for the purpose of recall, so that none made their way back into the system. I'm thinking that some brokerages such as IB are doing a whole lot less recalling than others like Fidelity. Nonetheless, the recalls that we have seen certainly contributed to the smooth upslope that Tesla enjoyed during today's morning trading and the low availability of shares to short works toward a more favorable trading environment tomorrow.

We now see TSLA share prices still quite close to the 194ish bottom and the downtrend quite possibly replaced with an uptrend now that could lead into the October delivery numbers. Now would be a really poor time to establish a short position, although I wouldn't put it past the larger holders of short positions to use some of the available shares for strategic selling at critical moments to support their current positions.

 

[Oil4AsphaultOnly]

I don't think the "flak" Elon is getting is from the media. The media just writes articles and regarding an acquisition, the media really doesn't matter much. It's the investors and large stakeholders that matter, and those are the people that are giving "flak" to Elon. If it was just one or two of the institutions, I don't think it would bother Elon. But it appears that there is significant resistance among institutional investors to the acquisition. Also, you can look at investor sentiment around this deal by looking at both TSLA and SCTY's stock prices. Both are down since the acquisition process started. And most notably, SCTY is down way below TSLA's offer price. I think some people here think that the merger is obviously going to happen, and think buying SCTY is like buying TSLA at a discount. But that in my opinion is ignoring the fact that institutions are not buying SCTY, even though it's lower than TSLA's offer price, due to high risk... and that risk is the possibility of the merger not going through and SCTY going bankrupt. Sure, that possibility might not be over 50%. Heck, it might not be over 20% (even though I think it is). But, I definitely think it's larger than the 1-5% some are assuming.

I get what you're saying, but isn't there a distinction between TSLA and SCTY investors? If the issues with SCTY's financials are so blantantly clear, then the SCTY investors will vote for the merger for sure. After all, they're being thrown a lifeline and they know it, right?

Those who own both TSLA and SCTY would obviously also vote for the merger, since they're in it for Elon Musk. And no amount of due diligence is going to sway that. Isn't Fidelity one of the funds that owns both?

So it's only with the TSLA-only investors that would balk at this deal? Aside from retail, which fund managers are these? Wouldn't these holders also know that voting against the merger is a no-confidence vote against Elon, and would also reduce the value of their holdings if they win? Kind of a cut-off-the-nose-to-spite-the-face situation?

Given the options of:
1) reading between the lines in Elon's "flak" (and thus believing that TSLA shareholders would rather incur pain now for some possible gain later and vote no)
2) Elon's "flak" was about the media (and thus the investors will follow the general trend of rubberstamping mergers)

I'm going with 2, because the "flak" theory, although plausible, has too many factors working against it to make it a workable plan. The TSLA-only investors should recognize how counter-productive it is and would rather sell for cash than hold stock to vote down the merger.

 

[Krugerrand]

You're not supposed to! It's a freakin sedan. They will have a smaller SUV/CUV on the same platform.

Come on! If I can't put a dining room set in my sedan (and a fridge, maybe a fireplace) then what sugar is it good for?! Geesh!

 

[SBenson]

To bring some practicality to the discussion, all this talk about odds and probabilities is irrelevant.

It's NOT like you are going to play 100 of these events and then you win some (or most) and then you lose some and overall you assess if you are making money or not.

If you are investing in SCTY and betting on the merger. You are playing a SINGLE binary event. Outcome of it could be either. And the question is can you be ok with the bad outcome.