Short-Term TSLA Price Movements - 2016

[dennis]

3) Because Elon just got a billion dollars worth of shares for $30 million, he has a huge capitol gain that he now owes 52% tax on (e.g. half a billion in tax). So he's turning around and selling half of those shares he just got to raise money for his tax bill.

When you exercise a non-qualified stock option, the difference between the exercise price and the current stock price is taxed at ordinary income rates, not capital gains rates. I believe that is 39.6% for the Feds and 13% for California.

 

[dennis]

1. He's exercising options that generate taxable income on the difference between the exercise price and fair market value of the shares (either at ordinary or long-term gain rates depending on how options structured).

The exercise of non-qualified options generates ordinary income for the difference between the exercise price and the FMV, regardless of whether the shares are sold or not.

The exercise of Incentive Stock Options (ISOs) is not a taxable event. In other words, you don't owe tax on the gain until you sell the shares, and then you receive capital gain tax treatment. However, the portion of that gain attributable to the price of the stock on the day you exercised is considered a tax preference item and is subject to the Alternative Minimum Tax.

The size of ISO option grants is limited to $100,000 per year that the option becomes exercisable. In other words, if you $10 option vests over 5 years, the maximum ISO grant size would be 50,000 shares ($100,000/$10 * 5). This means that most if not all of Musk's option shares are non-qualified and subject to ordinary income tax rates.

 

[Xpert]

So when market opens today, what do you guys think the stock will do?
My guess is it will go nuts...but likely DTU by close of day. I'd like to hear how everyone plans to trade.
Btw, where are Julian/Jess these days?

 

[Tslynk67]

So, do I understand this correctly... Elon is selling a *sugar*-load of his personal TSLA shares and then investing the cash into Tesla.

Is that right? In that case, the number of shares remains the same, but the company gets a "free" cash injection - basically a "gift" from Elon - of $1.6B

Such a demonstration of faith and selflessness would be incredible and nothing but a massive boost, no? And totally unexpected, I guess...

 

[GoTslaGo]

Btw, where are Julian/Jess these days?

Was wondering the same!

 

[dennis]

I know that one share looks pretty much like all the other shares to us, but to the IRS they can be quite different. I assume (since Elon isn't an idiot) that he's donating stock that he has already held for at least a year, and not the newly purchased options. They're probably the same strike price, so he will get huge benefit by not paying CGT on the donated stock.

The basis for the newly acquired shares is now the current FMV, not the strike price, since Elon is paying ordinary income tax on the difference between those to prices.

When you donate stock, it doesn't matter how long you have held it. You get the charitable deduction on the current FMV of the stock, regardless of what your basis is. So it is best to donate your shares that have the lowest basis. As you point out, this allows you to avoid paying capital gains tax on those shares since you are donating rather than selling them.

 

[Papafox]

So, do I understand this correctly... Elon is selling a *sugar*-load of his personal TSLA shares and then investing the cash into Tesla.

Is that right? In that case, the number of shares remains the same, but the company gets a "free" cash injection - basically a "gift" from Elon - of $1.6B

Such a demonstration of faith and selflessness would be incredible and nothing but a massive boost, no? And totally unexpected, I guess...

Here's how it works. Elon took a look in his piggy bank, couldn't find an extra $600 million rolling around in there to pay the taxes when he exercises his stock options, and so he is getting help selling shares in order to have enough tax money available to exercise his 5.5 million options and turn them into shares (and end up with more shares than when he started). If he didn't do things this way, he would have to sell shares on the open market to pay for his taxes when he exercises his options, and the shares you and I own would likely go down in value because of the tremendous selling pressure. Thus, it's a way to pay the taxes on his options while doing the least damage to the share prices.

 

[dennis]

So, do I understand this correctly... Elon is selling a *sugar*-load of his personal TSLA shares and then investing the cash into Tesla.

Is that right? In that case, the number of shares remains the same, but the company gets a "free" cash injection - basically a "gift" from Elon - of $1.6B

Such a demonstration of faith and selflessness would be incredible and nothing but a massive boost, no? And totally unexpected, I guess...

No, that is not correct. Tesla is selling newly issued shares worth $1.4B. Elon is exercising options for 5.5M shares at $6 per share, which nets Tesla $33M. Those shares should have already been included in the share count because the options were exercisable and "in the money".

As part of the offering, Elon is also selling $600M of his own shares, and using the proceeds to pay the taxes due on his stock option exercise. Tesla does not get any of the $600M, and it doesn't affect the share count.

 

[Renaud]

That raise came earlier than I was expecting it...
Anyway, it's there and what do we have now?

- Model S demand is still there, and nothing suggests it's dropping,
- Model X production seems to finally take off. Model S was a hit, the X will certainly be a hit: all of a sudden, Porsche Cayenne, Audi Q7, VW Touareg, Volvo XC90 all seem like dinosaurs belonging to museums...
-TE is under the radar, but has an enormous potential,
-Model 3 demand, no need to elaborate on this, and the money that goes with it,
-and now they have the money to make it all happen as fast as possible...

What else do we want?!
Considering they've managed to design and build the S, they eventually manage to build an extremely complex car such as the X, I bet they will manage to design M3 and build it.

 

[GoTslaGo]

Just another thought. I know there was much gnashing of the teeth regarding the possibility of Tesla shopping around for other battery sources. IMHO I think that is a smart thing. With a goal of a faster delivery of the Model 3 they need to make sure the battery supply is there. Even if the battery costs are higher from other suppliers.

The initial model 3's will likely be more highly optioned models with higher margins. So they can absorb the higher battery costs if needed. They will in turn generate greater demand for the model 3 once they start hitting the roads. The goal is to get them on the road.

By the time the base priced model 3's begin to roll out, the GF will likely be up to speed supplying the lower priced batteries, thereby maintaining margins. We may even see a boost in margins at that point with the more highly optioned later model 3 orders.

Meantime the extra space the GF has now will be used to manufacture components for the cars. As Fremont capacity increases and GF battery production ramps up, then the manufacturing will shift back to Fremont (and Livermore?).

My thoughts about Tesla logistics.

 

[Gerasimental]

In case anybody is interested, there are quite a few people over the Model S sub-forum taking delivery of their refreshed Model S today.
With all this high-level talk about the inner workings of the mega-machine that is equity markets, it is also important to keep a close eye on the product. The Model X forum has also been instructive to follow recently

 

[Johan]

There were 588k shares traded after-hours yesterday, in a range between $198-$212, ending the session toward the higher number. This is high AH activity. So far today in pre-market only about 10k shares have traded hands but we're slightly in the green compared with yesterday's close.

It will be an interesting trading day today indeed. I will be very interested to see what the market makes of this offering and also to learn the exact details of the price of the actual offering, and if there are any indications to it becoming oversubscribed.

 

[dc_h]

Share price now up.

 

[tanner]

So when market opens today, what do you guys think the stock will do?
My guess is it will go nuts...but likely DTU by close of day. I'd like to hear how everyone plans to trade.
Btw, where are Julian/Jess these days?

I'm thinking the opposite. Up until about 11 and then down, close out either below yesterday's close or close to it.

 

[tanner]

There were 588k shares traded after-hours yesterday, in a range between $198-$212, ending the session toward the higher number. This is high AH activity. So far today in pre-market only about 10k shares have traded hands but we're slightly in the green compared with yesterday's close.

It will be an interesting trading day today indeed. I will be very interested to see what the market makes of this offering and also to learn the exact details of the price of the actual offering, and if there are any indications to it becoming oversubscribed.

$198? No... That may have just been a bid, highly doubt that was filled. Lowest fill I'm seeing is $203.xx

 

[Johan]

$198? No... That may have just been a bid, highly doubt that was filled. Lowest fill I'm seeing is $203.xx

From Tesla Motors, Inc. (TSLA) After Hours Trading for yesterday:

Not that it matters much.

 

[tanner]

In case anybody is interested, there are quite a few people over the Model S sub-forum taking delivery of their refreshed Model S today.
With all this high-level talk about the inner workings of the mega-machine that is equity markets, it is also important to keep a close eye on the product. The Model X forum has also been instructive to follow recently

I'll be sure to thoroughly examine mine - I'm sure the quality is top notch though!

 

[tanner]

From Tesla Motors, Inc. (TSLA) After Hours Trading for yesterday:

View attachment 177245

Not that it matters much.

Doesn't seem to have been a fill: Tesla Motors, Inc. (TSLA) After Hours Trading take a look at every transaction.

 

[Johan]

Doesn't seem to have been a fill: Tesla Motors, Inc. (TSLA) After Hours Trading take a look at every transaction.

Of course they only post actual trades, not bids/asks. But like I said, not that it matters much.

 

[tanner]

Of course they only post actual trades, not bids/asks. But like I said, not that it matters much.

Right - sorry, little tired so wasn't sure what you meant at first