Short-Term TSLA Price Movements - 2016

[flankspeed8]

This is second time this week you annoyed me by attacking member that brings useful information to this forum.
I think you blocking Maoing is awesome solution, you don't have to read his posts, and rest of us don't have to read your attacks.

Especially since he posted from insideevs.com which means right or wrong, this will have some traction. He didn't write the story, just reported it. We should know what is out there as it can move the SP in the short term.

 

[Fallenone]

In the 10-K released today:

"As of December 31, 2015, the following two performance milestones were considered probable of achievement:

·

Successful completion of the Model 3 Alpha Prototype; and

·

Successful completion of the Model 3 Beta Prototype

"

Compared to last year's 10-K, Model 3 Beta Prototype is added to the "considered probable of achievement".

 

[jesselivenomore]

Also, do you guys know what a short squeeze usually looks like? The most famous ones in recent memory off the top of my head are VW acquisition by Porsche, Swiss Franc in 2011, and maybe GMCR when Einhorn got squeezed out. Look at what happens after the squeeze - it is a V top that ends up going right back down to where it started(if not much lower) after the shorts are done covering and no one left to hold the bag. That sounds great if you are a trader who can take advantage and sell high. Who here has actually done that? Who sold 290? So if you are not going to sell the pop, what's the point?

TSLA in 2013 is the exception, not the rule. Going forward, as investors I would much rather have the sustained appreciation of a maturing company than trying to time the whims and spikes of speculators.

 

[Rarity]

TSLA is the exception probably because Musk used the squeeze to reduce risk on the long-term plan. He could do so again.

Musk is a first-rate opportunist. A shame that SCTY didn't stay up long enough for the company to exploit.

 

[lango]

People really need to forget about the shorts and just worry about how Tesla the company is doing. I hope most are investing based on objective reasoning rather than some vindictive crusade. Dreaming about how to trigger the next short squeeze is short term piker mentality. SCTY had a massive short squeeze after ITC extension. Guess what, now it is trading far below where it was originally. Here's a secret(not a secret), if TSLA does what it is suppose to do, or what it says it will do, the short interest will take care of itself. If TSLA continues to miss earnings estimates by $1.00, the shorts will never go away and ride it all the way down.

Think of it this way. If every single short covered on this recent decline - no more short squeeze in the cards, would TSLA ever reach 300 and above? If the answer is no, that no longs were ever going to be willing to pay that price, then even if it got there on a short squeeze it would have been temporary. And it would have fallen back once the shorts were done covering with no one left to support the price. So what good is that unless you are a piker and sell? However, if the answer is yes, then one way or another TSLA will get there eventually. With or without shorts covering. It is simple, in the long run the stock will be priced based on the value the company produces, not based on some enduring battle between good longs vs evil shorts. Please.

One more thing about short interest that I am not sure many are aware of - it is not some bullish sign. Yes, high short interest represents volatility and a potential for sharp short term squeezes. But in the long run, for the vast majority of cases, high short interest(>20%) is indicative of either something wrong with the company or high inherent risk. Indeed shorts are a more sophisticated breed of investor than the vast majority of retail longs, which is why most of the time they are right. TSLA is not unique in its high short interest and there are a bevy of examples in recent years. GMCR, DDD, NUS, GPRO, FIT, LL, WTW, GRPN, CHK, JCP and yes, SCTY. Just a few names everyone knows out of many more where the shorts have gotten it right. Even NFLX where the shorts were wrong, it had drawdowns of 80%+ before it was all said and done.

In TSLA's case, I believe the short interest is representative of the risk inherent in the company. In fact, for its market cap, there are very few companies who are less established and more risky. I know some will take issue with that and tell you(or have been telling you) that TSLA is the safest bet out there. Those people might have also told you it will never go below 200. On the other hand, there are also very few companies of TSLA's market cap who have the potential to grow into hundreds of $billions if things go right. It is that dichotomy of risk vs reward that reflects TSLA's reality. Not purely reward or purely risk that some will lead you to believe.

And yes I have read Seeking Alpha and seen the level of discourse on that site. If you really believe they are representative of the 30 Million shares short, or $6 Billion, it would be grossly naive. The vast majority of negativity posted on internet forums about Tesla is not from shorts. It is from idiots. Shorts owning millions of shares and billions of dollars do not post on message boards. To equate their motivation and reasoning with those of idiots would be a mistake and underestimation.

Good points, jesse. It is an interesting discussion how market prices reflect the "real" probabilities of events, some people are even claiming that they are the real probabilities, but I don't agree with that at all.

Markets and market participants quite often get things wrong. To give some examples: e-commerce firm A reports a bad quarter. The market then punish all shares in the e-commerce sector, including e-commerce firm B which is gaining market share and has for a while, indirectly causing A's problems. Another example is gains or losses because of analysts upgrades who's opinion should not matter that much more than any other investor. In fact, analysts are often reactionary and conservative to not risk perform too bad so they would lose their job. So why are the share price moving because of them? There is also a lot of clobbering and clustering together in the market and things like index, sectors, competing sectors, countries etc. matters more than the individual company. So the market is basically wrong about individual companies on a consistent basis as the instant share price are not evaluated only on a company basis. In time these things correct and decoupling happens, but it can take years.

I am a firm believer that the market is wrong about the execution and bankruptcy risk of Tesla. I think there are three major events that needs to happen, and when they do Tesla's risk of bankruptcy and not surviving will be lower than any other big auto manufacturer:

The first is that EV's will have a significant market share that is going to grow and ICE market share will shrink.

The second is that Tesla is reaching volume production which I think would be about 400 000 cars a year to become a "major manufacturer". Volume production means higher margins and much lower survival risk. You don't need 10 million cars for that a year, but you need much more than 50k.

The third is that Tesla is among the top EV manufacturers (they don't even have to be the best one).

If these three things happen Tesla's risk is switched from the highest to the lowest, and all the ICE manufacturers have a higher risk to their business and survival then Tesla at that point.

How far are we from this and how likely is it? Point one and two will likely happen with Model 3, and point 3 is a given as they are the only one that is trying. Point one has already been shown to be true with almost 100% probability from all S customers pledging to not go back to ICE. It also makes sense for a large number of city commuters to use EV, even if they would never be used for long range. There are a lot of households that have more than one car and would be fine with a restriction that the second one can only be used for commuting.

So the only thing left is Model 3 reservations/demand and that they can build 400 000 cars at a price point where they can sell 400 000 (price point can be higher than the $35k target for the share of 400k that is Model 3, the $35k as a number does not matter for the survival risk of Tesla). They can reach 400k just with Fremont product line extension, and battery supply for 400k will happen even if GF does not have cell production.

So in conclusion the probability of Tesla having the least business risk in 3-4 years of ALL auto manufacturers is high, certainly way over 50%. And after Model 3 reveal and reservations it can be over 90%. I think it is actually more relevant to talk about the survival of GM or Ford then Tesla, at-least if you go by my probabilities. So what are we missing here that the market got right? I have no idea.

 

[erha]

I don't think there will be an actual squeeze until at least above 230-50. But that is besides the point. What I am trying to say is what ultimately determines where TSLA goes is not the shorts and where/when they cover. It is how the company does. That might sound so obvious that it borders dumb - but then why so much discussion and hand-wringing over short interest? It doesn't matter in the long run.

Because this is the short term thread. Short interest matters in the short term.

Apart from that I totally agree with you.

 

[TSLAopt]

People really need to forget about the shorts and just worry about how Tesla the company is doing. I hope most are investing based on objective reasoning rather than some vindictive crusade. Dreaming about how to trigger the next short squeeze is short term piker mentality. SCTY had a massive short squeeze after ITC extension. Guess what, now it is trading far below where it was originally. Here's a secret(not a secret), if TSLA does what it is suppose to do, or what it says it will do, the short interest will take care of itself. If TSLA continues to miss earnings estimates by $1.00, the shorts will never go away and ride it all the way down.

Think of it this way. If every single short covered on this recent decline - no more short squeeze in the cards, would TSLA ever reach 300 and above? If the answer is no, that no longs were ever going to be willing to pay that price, then even if it got there on a short squeeze it would have been temporary. And it would have fallen back once the shorts were done covering with no one left to support the price. So what good is that unless you are a piker and sell? However, if the answer is yes, then one way or another TSLA will get there eventually. With or without shorts covering. It is simple, in the long run the stock will be priced based on the value the company produces, not based on some enduring battle between good longs vs evil shorts. Please.

One more thing about short interest that I am not sure many are aware of - it is not some bullish sign. Yes, high short interest represents volatility and a potential for sharp short term squeezes. But in the long run, for the vast majority of cases, high short interest(>20%) is indicative of either something wrong with the company or high inherent risk. Indeed shorts are a more sophisticated breed of investor than the vast majority of retail longs, which is why most of the time they are right. TSLA is not unique in its high short interest and there are a bevy of examples in recent years. GMCR, DDD, NUS, GPRO, FIT, LL, WTW, GRPN, CHK, JCP and yes, SCTY. Just a few names everyone knows out of many more where the shorts have gotten it right. Even NFLX where the shorts were wrong, it had drawdowns of 80%+ before it was all said and done.

In TSLA's case, I believe the short interest is representative of the risk inherent in the company. In fact, for its market cap, there are very few companies who are less established and more risky. I know some will take issue with that and tell you(or have been telling you) that TSLA is the safest bet out there. Those people might have also told you it will never go below 200. On the other hand, there are also very few companies of TSLA's market cap who have the potential to grow into hundreds of $billions if things go right. It is that dichotomy of risk vs reward that reflects TSLA's reality. Not purely reward or purely risk that some will lead you to believe.

And yes I have read Seeking Alpha and seen the level of discourse on that site. If you really believe they are representative of the 30 Million shares short, or $6 Billion, it would be grossly naive. The vast majority of negativity posted on internet forums about Tesla is not from shorts. It is from idiots. Shorts owning millions of shares and billions of dollars do not post on message boards. To equate their motivation and reasoning with those of idiots would be a mistake and underestimation.

Jesse,

I greatly respect your experience but not the knowledge you demonstrate on here, although I do find it fascinating to read your commentary (how's that for a 'feedback sandwich', ha). For example, you reference technicals/momentum a lot and I think they can be used to tell a story but trying to use technicals/momentum to predict anything is like the financial markets equivalent of astrology, that is just my opinion though as I know a lot of people on here value technical analysis and to each their own.

I think your logic on shorts commentary is a bit flawed in a 'chicken or egg' sort of way when it comes to conclusion you are implying with regards to the correlation you point out between stocks with high short interest that have had a higher likelihood of going down historically. That correlation is a true fact, but per economics 101 you cannot use correlations for cause-and-effect conclusions.

I do agree that many people on here may not have (or demonstrate) their understanding of how short interest is likely to 'play out' over time. However, SHORT INTEREST is a VERY IMPORTANT DATA POINT, you stating emphatically that it is not is what spurred me to write this note. Whether one believes RELATIVELY high short interest ('relatively' is subjective and admittedly defined in the eye of the beholder, you may not think 31.5mm shares short of TSLA is relatively high but I actually do think it is entering the high-esh range...if it suddenly jumped to 50mm shares short from 30mm share short since the last report wouldn't you think that is 'relatively high'? or would you still try to ignore it for your trading decisions, where would YOU draw the line to where you admit that its an important data point? 40mm? 35mm? etc. you get my point) means the stock will go down further (e.g. institutional shorts are smarter than me with their superior mathematical/quant models with regards to TSLA) or up (institutional shorts are not smarter than me and their math/quant models are fallable with regards to TSLA)
OR
whether one believes RELATIVELY high short interest just means there is a higher chance of the stock to go sharply up (I define 'sharply' here as well over 100%) in a relatively short period of time (I define 'relatively' here as within 6-9 months) on substantial good news/sentiment is a bit of a different story and can be traded differently using options or LEAPs

I am in the latter camp (31.5mm short is sort of in my grey area for pulling the trigger but I probably will do something small at least) positioning my self for such a calculated risk/reward trade. One that I started trying to do in 2011 with LEAPs and kept doing through the actual short squeeze that ended up happening in 2012-2013...my very measly IRA account(mid 5 digit value) was down in 2011-2012 (to the very low 5 digit value) as I rolled the LEAPs forward and it wasn't working but by the middle/end of 2013 it was up 10,000% from where it started in 2011.

I'm not saying that a similar 'short squeeze' scenario will pan out or is even likely to pan out...but if I had to guess from my own subjective gut instinct that I am trusting (over mathematical models institutional shorts who I admit probably have a much higher IQ than me are required to use) I would say it is in the 10:1-20:1 range for a chance another short squeeze will occur in the coming 6-9 months. Based on my belief that it is at least a 10:1-20:1 chance for a repeat of what happened 3 years ago to happen again in the next 6-9 months, this type of calculated risk/reward is one I am willing to take again with A PORTION of my investable capital the potential for another 100:1 return (or potentially higher). In fact, I will keep doing it as odds are I would miss 3-5 times before i hit.

Unfortunately I have a very good full-time job and do not have the time to try and research other controversial stocks/companies for similar possible scenarios to play out, but perhaps one day if I ever launch my own Fund I would do that.

 

[MikeC]

Also, do you guys know what a short squeeze usually looks like? The most famous ones in recent memory off the top of my head are VW acquisition by Porsche, Swiss Franc in 2011, and maybe GMCR when Einhorn got squeezed out. Look at what happens after the squeeze - it is a V top that ends up going right back down to where it started(if not much lower) after the shorts are done covering and no one left to hold the bag. That sounds great if you are a trader who can take advantage and sell high. Who here has actually done that? Who sold 290? So if you are not going to sell the pop, what's the point?

TSLA in 2013 is the exception, not the rule. Going forward, as investors I would much rather have the sustained appreciation of a maturing company than trying to time the whims and spikes of speculators.

This is why I feel the term 'squeeze' is misused a lot on this board. 2013 was more a burning off of shorts, as Curt Renz said at the time. As a hardcore long, I am interested in short interest only because, at a given share price, the higher the short interest the more artificially depressed the share price is, so there is more fuel for the ride back up.

 

[JRP3]

Who sold 290?

Does $288 count? I try to sell some near the highs, hold my core, and buy more as it drops. My last buy was at $149. I don't consider myself a trader.

 

[jesselivenomore]

Lango, thanks.

I don't agree with your views on the market mechanism. The market prices risks and probabilities, rarely is it simply "right" or "wrong". It's just how probabilities work. If the market prices in a 90% chance that something bad will happen to a company, the share price will decline. If the 10% ends up playing out, the share price will recover. That doesn't mean the market was "wrong" or that share price never should have gone down, just that the unlikely occurred - which does quite a bit(in this case 10% of the time). Everything worked as it should. So the real question is how accurate is the market at pricing risks and probabilities? In this day and age of machines and algorithms, there is little edge left to squeeze out.

Very rarely will the market just be flat out wrong about something that you can arbitrage(maybe when forced liquidation happens). And these instances get rectified quickly.

Also when I am saying risks associated with Tesla, I don't mean bankruptcy. And I don't think the market is pricing that in at all either. At over $20B, the market is actually giving Tesla quite the benefit of the doubt when it comes to its future endeavors.

 

[Johan]

Also, do you guys know what a short squeeze usually looks like? The most famous ones in recent memory off the top of my head are VW acquisition by Porsche, Swiss Franc in 2011, and maybe GMCR when Einhorn got squeezed out. Look at what happens after the squeeze - it is a V top that ends up going right back down to where it started(if not much lower) after the shorts are done covering and no one left to hold the bag. That sounds great if you are a trader who can take advantage and sell high. Who here has actually done that? Who sold 290? So if you are not going to sell the pop, what's the point?

TSLA in 2013 is the exception, not the rule. Going forward, as investors I would much rather have the sustained appreciation of a maturing company than trying to time the whims and spikes of speculators.

The VW/Porsche squeeze was particularly short lived. A more drawn out squeeze for TSLA, perhaps in phases, make for excellent opportunities to raise capital to keep growing the company faster than it otherwise could have grown.

I know that in theory the market cap of any company should end up being equal to all the value that company will ever create for shareholders, but in reality we all know that the stock price/market cap has a life of its own. Say we get phenomenal news that causes massive short covering, creating a squeeze. Stock goes to $350 (number taken out of thin air). So now longs realize the stock price "got ahead of itself" and sell it back down to $180? At the risk of missing out on a potential further x2-3 gain in the next 5 years? And all theses positive news will bring in lots of new longs, people who "discover" TSLA for the first time, or longs who have been sitting out/been on the fence (I particularly remember you saying you wouldn't buy at $200 but if the stock hit $220 you'd go long again).

So short covering will have the effect of amplifying massive upswings, especially upswings resulting from fundamental de-risking of Tesla's future, but I fail to see why the inevitable V-shape will form. Again, this won't be the VW-Porsche story (one player - Porsche - quietly acquired a large part of the float of VW, announced it, made the shorts all run for the exit at the same time, thus temporarily inflating the VW stock price but nothing had fundamentally changed with regards to VW's business). If the majority of TSLA shorts run for the exits (cover) in a concentrated time frame it will be because of fundamental positive news de-risking TSLA permanently.

 

[lango]

Lango, thanks.

I don't agree with your views on the market mechanism. The market prices risks and probabilities, rarely is it simply "right" or "wrong". It's just how probabilities work. If the market prices in a 90% chance that something bad will happen to a company, the share price will decline. If the 10% ends up playing out, the share price will recover. That doesn't mean the market was "wrong" or that share price never should have gone down, just that the unlikely occurred - which does quite a bit(in this case 10% of the time). Everything worked as it should. So the real question is how accurate is the market at pricing risks and probabilities? In this day and age of machines and algorithms, there is little edge left to squeeze out.

Very rarely will the market just be flat out wrong about something that you can arbitrage(maybe when forced liquidation happens). And these instances get rectified quickly.

Also when I am saying risks associated with Tesla, I don't mean bankruptcy. And I don't think the market is pricing that in at all either. At over $20B, the market is actually giving Tesla quite the benefit of the doubt when it comes to its future endeavors.

But the market is pricing risk and probabilities as you say. And the question is how effective it is doing that and if it gets it right almost like clockwork or if it can be wrong with respect to the pricing of risk and probabilities. So with right or wrong I mean if the probabilities are priced and evaluated correctly, not that the outcome of the dice roll is 0 and 1.

The market is pricing in a not insignificant risk of bankruptcy for Tesla. The whole endeavor and mission for Tesla is to become much bigger and if they fail with that they are not going to survive.

Likewise, I think the market is pricing the risk of bankruptcy for GM and Ford to be lower than Tesla, and that is not the case if I go by my probabilities. So am I right and the market wrong? I don't see why that could not be the case, even if it might sound arrogant.

Also arbitrage is risk free profit right? What I am talking about is not that, but that the reward vs risk curve is much better in this case than the market price indicates.

I don't think we should have a discussion about market efficiency, really. But the notion that Tesla is a very risky investment because the market says so I think is flawed and is only true unless you dig deeper. Basically, the less research one has been doing the more risky and overvalued Tesla appears to be and vice versa. I have never seen a plausible bear case that has been done on a company and management level, all of them has been made by analogies or by (shallow) financial metrics.

 

[TSLAopt]

The VW/Porsche squeeze was particularly short lived. A more drawn out squeeze for TSLA, perhaps in phases, make for excellent opportunities to raise capital to keep growing the company faster than it otherwise could have grown.

I know that in theory the market cap of any company should end up being equal to all the value that company will ever create for shareholders, but in reality we all know that the stock price/market cap has a life of its own. Say we get phenomenal news that causes massive short covering, creating a squeeze. Stock goes to $350 (number taken out of thin air). So now longs realize the stock price "got ahead of itself" and sell it back down to $180? At the risk of missing out on a potential further x2-3 gain in the next 5 years? And all theses positive news will bring in lots of new longs, people who "discover" TSLA for the first time, or longs who have been sitting out/been on the fence (I particularly remember you saying you wouldn't buy at $200 but if the stock hit $220 you'd go long again).

So short covering will have the effect of amplifying massive upswings, especially upswings resulting from fundamental de-risking of Tesla's future, but I fail to see why the inevitable V-shape will form. Again, this won't be the VW-Porsche story (one player - Porsche - quietly acquired a large part of the float of VW, announced it, made the shorts all run for the exit at the same time, thus temporarily inflating the VW stock price but nothing had fundamentally changed with regards to VW's business). If the majority of TSLA shorts run for the exits (cover) in a concentrated time frame it will be because of fundamental positive news de-risking TSLA permanently.

Agree with this

 

[sunhelm]

Great article I saw on reddit about the coming decoupling of oil with car demand once EV adoption hits the exponential curve. Made me think, is that why it's called the Model S (the pre-cursor to the imminent S curve ) http://www.bloomberg.com/news/artic...-crash-is-coming-and-there-may-be-no-recovery

 

[Fallenone]

Pretty sure it stands for the S in the "Sedan".

Great article I saw on reddit about the coming decoupling of oil with car demand once EV adoption hits the exponential curve. Made me think, is that why it's called the Model S (the pre-cursor to the imminent S curve ) http://www.bloomberg.com/news/artic...-crash-is-coming-and-there-may-be-no-recovery

 

[jesselivenomore]

But the market is pricing risk and probabilities as you say. And the question is how effective it is doing that and if it gets it right almost like clockwork or if it can be wrong with respect to the pricing of risk and probabilities. So with right or wrong I mean if the probabilities are priced and evaluated correctly, not that the outcome of the dice roll is 0 and 1.

Right, this is where we disagree. Initial reactions on a minute to hourly basis may be wrong, but on a daily or especially weekly time frame I believe the market will be pricing in the correct probabilities.

The market is pricing in a not insignificant risk of bankruptcy for Tesla. The whole endeavor and mission for Tesla is to become much bigger and if they fail with that they are not going to survive.

Likewise, I think the market is pricing the risk of bankruptcy for GM and Ford to be lower than Tesla, and that is not the case if I go by my probabilities. So am I right and the market wrong? I don't see why that could not be the case, even if it might sound arrogant.

Also arbitrage is risk free profit right? What I am talking about is not that, but that the reward vs risk curve is much better in this case than the market price indicates.

I get what you are saying. And I just don't see the market pricing in much bankruptcy risk at all. In fact at 4-5 times revenues and 21 times book, its valuation is the crux of most bear arguments. If there was any significant bankruptcy risk being priced it would be much much lower. Like under 50. Tesla is overvalued if you look at current financials, and undervalued if you assume the best case for future financials. Once you factor in the probabilities for your future financials to play out, it is back to being fairly valued.

And I'd agree that the market is probably pricing in higher bankruptcy risk for TSLA than GM/F, but then it is also pricing in much much higher potential reward for TSLA as well, which is why it is rewarded with its valuation. I think overall its fair.

 

[lango]

I get what you are saying. And I just don't see the market pricing in much bankruptcy risk at all. In fact at 4-5 times revenues and 21 times book, its valuation is the crux of most bear arguments. If there was any significant bankruptcy risk being priced it would be much much lower. Like under 50. Tesla is overvalued if you look at current financials, and undervalued if you assume the best case for future financials. Once you factor in the probabilities for your future financials to play out, it is back to being fairly valued.

And I'd agree that the market is probably pricing in higher bankruptcy risk for TSLA than GM/F, but then it is also pricing in much much higher potential reward for TSLA as well, which is why it is rewarded with its valuation. I think overall its fair.

Yeah, well with my probabilities it is undervalued, as I see the best case being much more likely than the market price indicates and worst case less likely than the market price indicates.

I agree it is expensive and everyone should be cautious, but I don't see at as a foregone conclusion that the market is assigning the correct probabilities to the stock price and that I am wrong. That said, I remain a healthy skeptic to my own scenario as everyone should be.

it is hard to say really to what degree risk of bankruptcy is baked into the valuation. The bond market has high rates for loans to Tesla, much higher than to GM and Ford. This should also be reflected in the SP.

 

[Papafox]

... I think overall its fair.

If you think the market price of TSLA is a fair evaluation of potential risk vs. reward, then why would you be long? Seems like this becomes just a roll-the-dice gamble if that's your position. Maybe I have misunderstood you.

 

[Fallenone]

I think what Jesse means is that after factoring all the probability of target price be super bear, mid bear, minor bear, sideliners, minor bull, mid bull, super bull, we get the market price as a "fair valuation". He's on the bull side so he thinks the bull case probability is higher than the market's designated probability, therefore long.

If you think the market price of TSLA is a fair evaluation of potential risk vs. reward, then why would you be long? Seems like this becomes just a roll-the-dice gamble if that's your position. Maybe I have misunderstood you.

 

[Papafox]

I think what Jesse means is that after factoring all the probability of target price be super bear, mid bear, minor bear, sideliners, minor bull, mid bull, super bull, we get the market price as a "fair valuation". He's on the bull side so he thinks the bull case probability is higher than the market's designated probability, therefore long.

I guess my question has to do with the concept of "fair". If you separate investors into the segments mentioned above, you can achieve some type of average valuation, but how does this valuation connote "fair" if a disproportionate number of investors are guessing wrong?