Short-Term TSLA Price Movements - 2016

[vgrinshpun]

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

Exactly. And may be we can get off Elon's back and give him some time that is necessary to make sure that SMP2 is impeccable.

 

[Cattledog]

Exactly. And may be we can get off Elon's back and give him some time that is necessary to make sure that SMP2 is impeccable.

Yes, I'd rather he get some sleep and release it when ready. I think for timing, it would actually be more powerful Thursday of next week, leading into the Gigaparty.

 

[schonelucht]

Exactly. And may be we can get off Elon's back and give him some time that is necessary to make sure that SMP2 is impeccable.

Agree, the angst created around this total non-issue by the more rabid fanbase is off the charts. Granted Elon brought this a bit over himself by being his usual pro-active overoptimist, but still. Just like everyone, I am looking forward this his blog because I want to learn more about were he sees the unique value proposition on Tesla Energy but it's not like it can't wait a few days.

 

[MitchJi]

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?

No. They said after due diligence is completed it will take 2-3 months to complete the deal. Please do yourselves a favor and actually listen to the calls. And please at least do that before posting. An excellent way to elevate the usefulness of this thread would be if we would all make sure we are posting correct information.

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 big 5 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

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"

Would you please explain the difference between fact 1 and 7? I probably don't understand the terminology?

How long is the voting window? Thirty days? If Tesla has some discretion on this they'll probably do what the large institutions prefer. You don't want to annoy someone whose vote you want.

It probably is required to wait for the shares to clear (3 days?) before voting. Then another 3 days to return the shares, so a six day round trip. Fact 4 the holdback, why can't they vote the shares they holdback (20-50%), then call in some of the shares, replacing them with the shares that they have already voted? If they "roll" them that way, depending on the window size, and the percentage of holdback they might not need to call any shares at all. I don't think that they could do that without triggering some rise in the SP, which would trigger some margin calls, but the impact of doing it that way would be much less than you think.

Also I believe that the price will decline afterwards to a level without the squeeze. I think that there will be a lot more shorts at $300-$500 than there are in the $220's.

 

[Lessmog]

@ Mitch,
Apologies for lack of diligent research here, but I can't imagine how an institution could as you say "roll" their held back shares for voting over several days. Who can then check that nobody votes "early and often" as the cynical saying goes? 92M shares might count as 920M ... out of 147M or whatever the actual number.

Perhaps (probably) I miss something here.

 

[MitchJi]

1. 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.

2. 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.

1. Yes.
2. There's no way for the TE plan to overcome the effects of an epic squeeze plus the effects of that plan.

 

[MitchJi]

@ Mitch,
Apologies for lack of diligent research here, but I can't imagine how an institution could as you say "roll" their held back shares for voting over several days. Who can then check that nobody votes "early and often" as the cynical saying goes? 92M shares might count as 920M ... out of 147M or whatever the actual number.

Perhaps (probably) I miss something here.

I'm not sure. I'm not an expert in share holder votes. What prevents them from doing that anyway? Are votes tied to specific shares owned on a specific date?

Maybe there's no window for share ownership? You vote the shares you own as of a specific date? Makes sense. I hope so!

 

[jhm]

I've been sitting with about a 3:1 TSLA:SCTY ratio. So, thinking very short term let's say SCTY drops to $24 because of whatever (lots of coal-lovers on TV this week, or something) and SMP2 is released and market smiles and TSLA jumps to $230.
If the above happens then switch ratio to 1:3 TSLA:SCTY and wait for re-convergence?
Of course, above is predicated on the steady movement in favor of SCTY purchase.

You've already got heavy exposure to SolarCity (relative to market caps). So you are already in a position to benefit from a successful merger. More exposure gives you more risk should the deal breakdown. So you can watch the spread to see when the upside gain is worth the risk in your estimation. Of course, if the spread dramatically widens, that could be a signal that the deal is breaking down. But for now the market seems to be gaining confidence in this deal.

The market continues to reduce the spread. Down to $7.35 a few minutes ago.

 

[jhm]

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

When the two stocks track each other, they are mostly tracking Tesla in the short run (as it has about 11x the market cap of SolarCity) and anticipating the combined company in the long run. So whatever volatility SolarCity may have exhibited in the past, it is largely irrelevant going forward.

 

[jhm]

Wow, even with Tsla shooting up, the spread is continuing to narrow. Now $5.83.

Scty is over $27, the threshold I said was needed for Tsla to climb above $225. But the spread needs to remain narrow so Tsla can keep climbing.

 

[Gerasimental]

Soundtrack to July:

I went from negative to positive, and it's all good.

 

[brian45011]

I'm not sure. I'm not an expert in share holder votes. What prevents them from doing that anyway? Are votes tied to specific shares owned on a specific date?

Maybe there's no window for share ownership? You vote the shares you own as of a specific date? Makes sense. I hope so!

I think there will be a record date announced, similar to dividends (three days after the ex date to allow the settlement to occur). If one is a holder on the record date, you get the vote. The voting period may be several weeks to allow holders to consider the information provided, but it doesn't matter if the shares are bought or sold after the record date.

It would be helpful for someone to explain how all the open option interest (which changes dynamically minute by minute) effects the price of the underlying shares during the period prior to when the votes are counted.

 

[austinEV]

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

Positive Q3 guidance.

But then again how much credibility there is left in TSLA guidance is questionable. So...

This is the very issue I am puzzling over. The Q2 financials should be terrible. That's the bad news. Hard to say how it manifests, which metrics in particular look bad I just take it for granted they are all really bad. But, that is probably the end of the bad news. One could argue that the bad news is out already and the stock suffered from the numbers release already (or failed to do so, which is another story). So their could be a relief rally that the news is out, as bad as expected, and no more bad news is coming to help the Bears. Q3 financials should be great to super-great since the Model X ramp appears to finally be in swing and the channel is stuffed from last quarter.

In the past, the market swung on financial results. I am positive that the market would react to GOOD results too, but bad results maybe not... The dynamics lately has been (knock on wood) immunity to bad news. The delivery miss, the AP in Florida incident, all have been shrugged off. Possibly the lack of shares to short, the firming up of longs is just providing a downside floor. The possibility of a lurching revaluation in 18-24 months is looming, and the makings of a potential squeeze make it hard to stay on the sidelines...

TLDR: More Fear Of Missing Out than fear of Q2 results I think.

Edit: @jhm I wish I had taken your posts to heart and bought a bunch of SCTY a few weeks ago. I have historically had a reverse Midas touch with SCTY.

 

[JBRR]

Elon Musk on Twitter

"Finishing off the plan while listening to the soundtrack from Gatsby. Seems appropriate.."

 

[Lump]

JP Morgan note
Tesla Motors: Caution, Earnings Ahead

Tesla Motors (TSLA; UW): Lower 2Q EPS on less than expected deliveries; lower 2016 price target to $180 (from $185 prior) on our lower estimates — remain cautious. We are lowering our 2Q EPS estimate on less than expected deliveries. Based upon Tesla’s recent announcement that 2Q deliveries tracked just 14,370 units, we update our model relative to the 17,000 units we had forecast, with the effect being lower profits near-term. Model S deliveries tracked 9,745 units in 2Q vs. the 12,000 units we had modeled, while Model X tracked 4,625 units vs. our estimate of 5,000 units. We now forecast full year combined Model S and Model X deliveries of 78,180 units vs. 80,810 units prior, vs. and implied guide of slightly below 80,000 units (vs. prior guidance of ~80,000 to 90,000). Our 2Q EPS estimate declines to a loss of -$0.60 vs. -$0.45 prior (and vs. consensus of -$0.53), given the lower deliveries. Our December 2016 price target declines to $180 vs. $185 prior (implying -18% downside potential), on our lower estimates.

 

[spacekadet]

So with the 2nd master plan coming out within hours, how's everyone preparing for it? I've sold half of my short term options to lower the risk in case of another 'buy the rumor, sell the news' scenario. If Elon lists out the plans for trucks, buses, flying cars, etc., will that move the stock? I don't think so. I wish he had stuck to the 500k cars by 2020 goal and delivered an extremely surprising 350k cars in 2018. That would really move the stock.

But ultimately, I think we need to stop thinking that Elon cares about the SP as much as the investors do. His primary concern is to bring sustainable future as soon as possible. The stock price is important for raising the funds necessary to realize the dream, but he's definitely concentrating on the long term instead of Q to Q numbers and planning for a short squeeze like everyone's hoping here.

 

[austinEV]

So with the 2nd master plan coming out within hours, how's everyone preparing for it? I've sold half of my short term options to lower the risk in case of another 'buy the rumor, sell the news' scenario. If Elon lists out the plans for trucks, buses, flying cars, etc., will that move the stock? I don't think so. I wish he had stuck to the 500k cars by 2020 goal and delivered an extremely surprising 350k cars in 2018. That would really move the stock.

But ultimately, I think we need to stop thinking that Elon cares about the SP as much as the investors do. His primary concern is to bring sustainable future as soon as possible. The stock price is important for raising the funds necessary to realize the dream, but he's definitely concentrating on the long term instead of Q to Q numbers and planning for a short squeeze like everyone's hoping here.

I don't think the SMP2 is going to move the stock one way or the other. It is a sideline. The main story is the GF party, Q2 ER, SCTY merger.

If SMP2 is about TE: Meh, we knew that. great to write it down.
if SMP2 is about vehicle lineup: Meh, great. We expected you to have a long term plan for a bigger lineup. Great to write it down.

Edit: as always, I am writing from the respect of Mr Market, not the enthusiast community. It is important to keep them seperate in your mind. SMP2 can be really neat for an enthusiast and negative or neutral to the market. Same as UI releases, product upgrades etc.

And no, Elon doesn't care about the stock price other than "really high in 10 years".

 

[Sparky]

Elon Musk on Twitter

"Finishing off the plan while listening to the soundtrack from Gatsby. Seems appropriate.."

Cue untethered speculation in 3,2,1...
Song "Back to Black"; TSLA cash flow positive!!
Song " Kill and Run"... hmm, uh oh. Bye SCTY.
Song "Hearts a Mess", "Love is Blindness"...
... dear me. Some dark sh**.

 

[tinm]

While I'm curious to see what the SMP2 looks like, I view the timing as interesting considering the miserable Q2 results. Seems like Elon's trying to keep eyes on the prize (long-term wins, sustainable transport and energy) and not worry about the short-term mess, which is Wall Street's specialty.

I'm particularly curious what input he's solicited from others at Tesla, even in his trusted inner circle, versus how much is just pure Elon. I actually hope he's had a lot of collaboration from the team, as team buy-in can only help boost chances of successful execution.

 

[MitchJi]

I think there will be a record date announced, similar to dividends (three days after the ex date to allow the settlement to occur). If one is a holder on the record date, you get the vote. The voting period may be several weeks to allow holders to consider the information provided, but it doesn't matter if the shares are bought or sold after the record date.

Thanks!

Can the institutions contact the shorts and give them a choice between getting their shares called or signing proxy statements, allowing either the instructions or TSLA to vote for them? If that's possible it seems likely to be what happens. Institutions get to continue receiving their interest payments and shorts get to keep their shares, and no epic squeeze.