Short-Term TSLA Price Movements - 2016

[racer26]

Nice play. I think we will have a nice bounce up into the close.

Any technicians in da house? Waaaay oversold intraday...

$201.65 was final LOD. Buh bye. That's all "they" get...

I sold my TSLA@220 J17's at a small profit after lunch (wish I'd sold them first thing this morning) and traded them in for SCTY@16 D16's. Scored those for a net effective price of $21.40/SCTY incl premium, or the equivalent of [email protected]. For some reason the SCTY@16 D16 strike had a strangely low ask compared to other strikes/expiries, and I got it under the ask.

My theory here, being merger arb + I think the effect of tomorrows announcement is likely to be more pronounced on the SCTY side.

 

[FluxCap]

I'm expecting TSLA to close at $205-210 tomorrow and $210-220 end of next week. Just my WAG that's probably wrong.

Agree!

 

[tander]

Thanks to all here who pointed out the (obvious, I know) arbitrage/underpricing of SCTY.
I have done really well with that!

Anyone think there is any real risk of it not closing and then taking a dive?

I think the risk of it not closing is slim. But unless SCTY gets above the acquisition parity it should go down by about 5% because of the dilution. However, if some aces up sleeves are dropped that could probably be turned the other direction.

I hope Tesla has some sort of sales projections on Friday. Maybe even an announcement of a deal with a major homebuilder for solar roofing.

That would be great if they did a deal with a homebuilder. But I suspect it will be like the model 3, the supply might not be high enough to satisfy consumer demand for a while. I'll settle if they start taking deposits over the weekend and announce the results of that on Tues. But a deal with one of the homebuilders would be awesome.

 

[electracity]

Anyone think there is any real risk of it not closing and then taking a dive?

Not me. I would hate to lose money on my last SCTY trade.

On this topic, Elon has done a bit of a poison pill with the SCTY purchase. The new solar roof belongs to Tesla, as does the Panasonic deal. The larger SCTY institutional holders get the message , even though it has not really been discussed in the press.

The current SCTY SP undervalues the probability of closing the deal, IMO.

 

[Ulmo]

View attachment 200339

Aha! I learned this in Q1. I did much better this time! (Buy low, sell high -- same with options. Also: the herd buys their rumor, and sells their news.)

 

[racer26]

I think the risk of it not closing is slim. But unless SCTY gets above the acquisition parity it should go down by about 5% because of the dilution. However, if some aces up sleeves are dropped that could probably be turned the other direction.

That would be great if they did a deal with a homebuilder. But I suspect it will be like the model 3, the supply won't be high enough to satisfy consumer demand for a while. I'll settle if they start taking deposits over the weekend and announce the results of that on Tues.

It shouldn't really go down with the dilution since the value of SCTY joins the fray at the same time. That means that yes, TSLA issues some $2.5B of new TSLA shares, but eats up the $2.2B in SCTY market cap as part of it. Net should be close to breakeven, all else being equal.

What we should see is that when the deal becomes approved but before the merger is consummated, the two tickers will trade in lockstep at the 0.11 exchange ratio - the question is which one moves to make that happen on vote day? TSLA down or SCTY up?

 

[cluster]

In order to catch the substantial arbitrage opportunity, the simplest strategy is probably to short 1 share of TSLA and long 1/0.11 shares of SCTY. The underlying assumption is of course those traders must believe the merger will eventually happen.

With >3.5% green in SCTY and ~0.7% green in TSLA today, I suspect this is what's happening. That's the short-term cost of merger for TSLA holders.

 

[techmaven]

I think the bear algobots chose very strategic times to unload their stock. When we failed at the ~$213.50, they then basically induced a long panic... and at every stop along the way down to closing the gap and a bit more. I don't think this is on the bears... although they do have a slew of people talking and posting crap. It is the weak longs that are listening to that crap. And the big traders are not supporting Tesla. Also, we're fighting the NASDAQ all day, taking outsized moves to the downside, and since it's a down day, we've been swimming against that tide. Now we have a lot of resistance to fight on the way back up if we get today... but it's still possible.

 

[racer26]

In order to catch the substantial arbitrage opportunity, the simplest strategy is probably to short 1 share of TSLA and long 1/0.11 shares of SCTY. The underlying assumption is of course those traders must believe the merger will eventually happen.

With >3.5% green in SCTY and ~0.7% green in TSLA today, I suspect this is what's happening. That's the short-term cost of merger for TSLA holders.

Or if not shorting TSLA, the smarter longs temporarily moving more of their money into SCTY from TSLA as many of us, myself included, have been doing over the past weeks.

 

[FredTMC]

Nice play. I think we will have a nice bounce up into the close.

Any technicians in da house? Waaaay oversold intraday...

$201.65 was final LOD. Buh bye. That's all "they" get...

No help from macros. But "Boing"...

Keep bouncing TSLA... get some back...

 

[alseTrick]

Positive things happening in Q4 that should offset the ZEV credits include:
- 100 kWh cars (higher relative and absolute margins)
- AP2 cars (higher margin)
- Continue to lower cost of goods as they get better deals on parts
- Tesla Energy might toss in a few million in profit.

That's my fault. I meant Q4 Model S/X sales volume specifically. Why should it be expected for sales volume to increase above and beyond Q3 without the slashing of inventory vehicle pricing?

What you said makes sense in terms of total Tesla revenue.

 

[Irishjugg]

Thanks to all here who pointed out the (obvious, I know) arbitrage/underpricing of SCTY.
I have done really well with that!

Anyone think there is any real risk of it not closing and then taking a dive?

I think there is almost 0 chance of the deal failing. I've felt that way for some time (and am loving my 150/share equivalent TSLA even into today's weakness)

 

[cluster]

Or if not shorting TSLA, the smarter longs temporarily moving more of their money into SCTY from TSLA as many of us, myself included, have been doing over the past weeks.

But your strategy is not hedged against the overall market sell off.

 

[esk8mw]

Looking at Gross Margin, can someone help me make an apples to apples comparison?

Q2 letter gave a GM of 21.9% - non-GAAP and excluding ZEV (which we now learned was just $64,000 in Q2 - no wonder Elon was so pissed).

Q3 gives 2 different figures:
1. 25.0% - non-GAAP excluding ZEV and SBC
2. 23.3% (140 bp increase) - non-GAAP excluding ZEV

I'm assuming the correct analysis here is that the 23.3% GM is the number we should compare to the 21.9% but want to confirm. Does anyone know if the 21.9% GM number excluded ZEV and SBC, or just excluded ZEV?

This is relevant for Q4 guidance. They guided to 23.9% - 24.9% GM by Q4 in the Q2 letter (2-3% increase from 21.9%) and maintained that guidance. It sounds like we should expect a 0.6% - 1.6% improvement in Q4.

 

[larmor]

I think there is almost 0 chance of the deal failing. I've felt that way for some time (and am loving my 150/share equivalent TSLA even into today's weakness)

Since it is not a cash cow, it is a cash vacuum going to get cash into a solar business-- which is hard to do.
The only negative from the CC, was why TM still wants to make M3 when there is a huge demand and profit for 100kwh batteries and cars. I wonder if it will be asked, why make cars, when TE revenue gets booked?

 

[Turing]

I think there is almost 0 chance of the deal failing. I've felt that way for some time (and am loving my 150/share equivalent TSLA even into today's weakness)

I thought the chance of failing was extremely low but now that Panasonic has signed up for buffalo the chance is essentially zero.

 

[racer26]

But your strategy is not hedged against the overall market sell off.

Do I care what the overall market does? I don't really lend that much credence to the theory that the overall market's impact has anything to do with what one particular stock does, even less so in the case of a high-growth, highly-differentiated stock like TSLA and SCTY

 

[dandurston]

That's my fault. I meant Q4 Model S/X sales volume specifically. Why should it be expected for sales volume to increase above and beyond Q3 without the slashing of inventory vehicle pricing?

# of Orders will increase in Q4 because:
1) China is showing signs of life
2) AP2 hardware (a lot of people have been holding off for this)
3) Model X publicity

With regards to #3, I think the Model X is well positioned to see a large increase in orders. This may be why Tesla axed the lower margin 60 version. Tesla has dramatically improved the quality of the X and we could have some good news coming, like it might win Motor Trend SUV of the year announced any day now. If nothing else, having the cars on the road and in stores is generating a lot of new interest.

 

[dandurston]

I don't know how stock based compensation (SBC) works but that took $0.57 off the EPS or $90 million overall. If Tesla can get this down they could save a lot.

 

[brian45011]

Astounding. O'Leary:
"BMW has an equivalent product and it's getting better and better all the time". No, no other car manufacturer has an even remotely equivalent product. This is an indisputable fact.
"Gravity will hit eventually, Tesla makes one thing: a car". No, Tesla make home batteries, will soon make solar panels, will go in to ride sharing market. These are facts.
"This stock will crash and then Big Daddy will be right. If not, then all the things I've learned in decades of trading are wrong." He keeps slamming the "young guys, who all own the stock and want to own the car". Maybe he should listen to what he's actually saying? All the young people love the stock, the company and the product.

"Mr. Wonderful" is the personification of the old saw about Alaskan bush pilots:

There are bold ones and there are old ones, but there are no bold old ones.