Short-Term TSLA Price Movements - 2016

[dakh]

We don't know yet what is the period of time is where one needs to hold a share to vote do we? Maybe you need to hold it on or before a certain date or on a particular date or during a certain period and then you get to cast a vote. If it's a particular date/period and announcement is retroactive then all the recalls that happen would be before the announcement. If it's on a particular date (by close?) in the future or for a period in the future that'd be some carnival.


..also, say there's beginnings of a short squeeze. Even for institutional investors, if they can make say 30+% now vs. casting a vote, possibly there would be enough of them that prefer to simply take the money to limit the shortage.

 

[mmd]

The article includes some math that is not relevant, while avoiding math that is relevant...

The top five institutional holders of Tesla, including Fidelity, Baillie Gifford, T. Rowe Price, BMO Global Asset Management and Vanguard, made up more than 30% of the shares outstanding at the end of March. Fidelity, Vanguard and BMO are also among the top five holders of SolarCity shareholders, making them more likely to approve the deal, Mr. Burnett says.

These five largest shareholders also held more than 38% of all outstanding shares excluding shares owned by Musk (as he is not voting). Even more significant out of the 44.5M shares owned by these five, at least 22M shares are lent to short sellers, and need to be recalled before the vote. Since these 22M shares represent lion's share of short interest, recalling them will result in massive TSLA move up.

One would think that Mr. Burnett, head of research at Wall Street Access, a brokerage firm that provides research to investors who wager on mergers and acquisitions, should have mentioned these relevant facts, and WSJ should've reported on them...

Well, your second para is speculation based on your own napkin math, along with assumptions made about the extreme end of whatever information you could scrape from wherever. it is not based on any data or solid analysis.

Their holdings are part of the 176M shares that are long, and they don't need to vote on the lent shares. Since they hold proportional quantities in both companies, from their perspective this is a neutral deal, unless the synergy creates extraordinary additional value for the combined entity.

 

[dakh]

That would be scary for Tesla investors if you check the price histroy of SCTY in the past years.

Oh I know all about it :/

 

[mmd]

For those who are really interested in the short sale rules, this SEC page on regulation SHO has some very detailed information. Rule 204 is the most interesting one. In particular, market makers are allowed to make naked short sales to provide liquidity. They have 13 days to borrow the shares they sell short to deliver to the long. It could be that a large portion of the short positions are also held by the same top long holders to make markets. Short positions are held for a multitude of reasons.

Key Points About Regulation SHO

See Also: Short Selling Definition | Investopedia

 

[FANGO]

With the Q2 delivery miss, my expectation is that Q2 earnings will be a miss. Is there other information to counter this?

Earnings estimates will be calibrated based on what analysts know about the number of deliveries. I bet Q2 earnings will be pretty close to analyst estimates on the day of.

 

[Mario Kadastik]

Well don't know how much that has been happening, but a nice strategy my majority holders to increase their own positions would be to loan out shares, then buy the shares from shorters immediately. Once the short interest is high enough recall their shares forcing the price up while not selling themselves so artificially causing the deficit of shares being sold.

I wonder if market makers are allowed to sell naked shorts would Tesla be willing to accommodate them and issue them stock to cover the missing shares at a high price (i.e. on the squeezed price). That would provide a nice funding opportunity to Tesla at a high stock price and I doubt the market would punish them for selling a few million shares at $600 or smth like that

 

[WarpedOne]

I'm not selling below 1k. Just saying ...

 

[EinSV]

The idea that if there is a short squeeze, market makers will bail out shorts by taking on the extreme risk of naked short selling in the midst of the squeeze seems to fall squarely into the category of wishful thinking by shorts. Good luck with that!

 

[Gerardf]

Nice overview of the biggest shorts.

Short Interest Tables - WSJ.com
On the list of biggest shorts as % of the float SCTY is at position 10 (with 42,8% of float !!) , and TSLA at 44 with 27.7% of float.

This information is dated July 12, and probably directly based on the delayed data as on the Nasdaq site (thus the status of June 30).

 

[W84M3]

At least 3k for me. When Elon says 1 trillion market cap, I believe him

 

[AlMc]

Well don't know how much that has been happening, but a nice strategy my majority holders to increase their own positions would be to loan out shares, then buy the shares from shorters immediately. Once the short interest is high enough recall their shares forcing the price up while not selling themselves so artificially causing the deficit of shares being sold.

I wonder if market makers are allowed to sell naked shorts would Tesla be willing to accommodate them and issue them stock to cover the missing shares at a high price (i.e. on the squeezed price). That would provide a nice funding opportunity to Tesla at a high stock price and I doubt the market would punish them for selling a few million shares at $600 or smth like that

Mario...Good to see you posting. Thanks.
Maybe the scenario you lay out in your second paragraph is actually the SMP2

 

[DrJohnM]

Note sure if this has been posted (not seen anyway)

Tesla Motors Inc (TSLA) Electrolyte "Secret Sauce" Revealed By Trip Chowdhry

In his previous note, the sell-side firm gave valuation of $50 billion to the Gigafactory. Global Equities Research reiterated an Overweight rating with price target of $385 on Tesla stock

 

[DrJohnM]

Source FT: VW shares up 6.5% after €7.5bn operating profit for first 6 months (before one off exceptional costs - €2.2bn mostly to cover the emissions scandal)

 

[vgrinshpun]

Well, your second para is speculation based on your own napkin math, along with assumptions made about the extreme end of whatever information you could scrape from wherever. it is not based on any data or solid analysis.

Their holdings are part of the 176M shares that are long, and they don't need to vote on the lent shares. Since they hold proportional quantities in both companies, from their perspective this is a neutral deal, unless the synergy creates extraordinary additional value for the combined entity.

My second paragraph based on facts. My napkin math is used to arrive at conservative conclusion based on available information. It is conservative because it presents lower boundary of the liquidity crisis the unwise are going to experience.

Fact #1: there were 44.5M shares held by the five institutional holders at the end of Q1
Fact #2: all of these 5 largest institutional shareholders have brokerage houses and lend shares
Fact #3: there are virtually no TSLA and SCTY shares available to short, interest charged to short sellers sky rocketed since the announcement of Tesla's proposal to acquire SCTY
Fact #4: internal rules limit amount of shares large institutional shareholders can lend for short selling to have a holdback of between 20% and 50%
Fact #5: Elon Musk owned 31.1M shares as of May 26
Fact #6: large institutional shareholders as a group owned 92.7M shares of TSLA at the end of Q1
Fact #7: there are total of 147M outstanding TSLA shares
Fact #8: there were 31.0M shares sold short as of June 30th
Fact #9: big 5 required to recall shares before acquisition vote as required by their bylaws, enabling them to vote

A: Fact #1, #3, and # 4 ==> conservatively there are 22.2M shares sold short by the big 5 (44.5 / 2)
B: Fact #5, #6, #7 and #8 ==> there are total of 54.3M shares owned by retail investors (147 + 31 -31.1 - 92.7)

A, B and Fact #9 ==> Short sellers will need to buy out a whopping 40.9% of shares held by retail investors. My apologies - this is gonna hurt.

All of the above is conservative, i.e. 40.9% represent lower boundary of percentage of available shares that short sellers will need to buy to satisfy recalls because above calculation factors in only 5 biggest institutional shareholders which collectively hold only 48% of all shares owned by institutions and the calculation uses minimum percentage that institutions are allowed to lend.

"Unwise"

 

[vgrinshpun]

The idea that if there is a short squeeze, market makers will bail out shorts by taking on the extreme risk of naked short selling in the midst of the squeeze seems to fall squarely into the category of wishful thinking by shorts. Good luck with that!

Exactly. Not going to happen.

 

[vgrinshpun]

I'm not selling below 1k. Just saying ...

Thank you for the warning, Warped. I am going to sell at $999 to avoid massive dip caused by you getting rid of your position.

 

[FredTMC]

Exactly. Not going to happen.

Thx for posts! I hope this voting induced squeeze happens. This will be epic

Are we expecting vote to happen soon? Like around Q2 EC in early August?

 

[racer26]

Awesome post showing the breakdown of conservative real estimates. There's a world of hurt in store.

 

[vgrinshpun]

Thx for posts! I hope this voting induced squeeze happens. This will be epic

Are we expecting vote to happen soon? Like around Q2 EC in early August?

My thinking is that logical sequence of events would be Elon using SMP2, GF party, and Q2 EC to explain rational behind TE and SCTY acquisition and answer all of the questions posed on this topic by analysts before the vote. This also will guarantee that the squeeze will not be, as some suggested, just a technical event with the precipitous roll back in SP, but instead will allow market to understand TE business plan and price it into the stock.

 

[Cattledog]

This also will guarantee that the squeeze will not be, as some suggested, just a technical event with the precipitous roll back in SP, but instead will allow market to understand TE business plan and price it into the stock.

Let's hope that the outline is cogent (I know it's be brilliant) and digestible by analysts and retail buyers.