Short-Term TSLA Price Movements - 2016

[MitchJi]

For those looking at the mechanics of short selling and recalls for voting, this is probably a relevant but old article. It does look like there are issues with lent and re-lent shares and recalling them in time. And with SCTY particularly being heavily shorted as a % of outstanding shares, this recall process is bound to be messy and also somewhat scary as a dual TSLA & SCTY (long options position entered after the offer announcement) investor.

How Borrowed Shares Swing Company Votes

I don't have access to the complete article, but I gather it supports the theory that an epic squeeze is imminent ?

 

[vgrinshpun]

Apparently the recall activity lately went down significantly, so it seems that today's run up is driven by news, probably a combination of reassurance of progress in TSLA / SCTY due diligence over the weekend and the press event at the GF tomorrow.

Ihor Dusaniwsky on Twitter

 

[vgrinshpun]

I don't have access to the complete article, but I gather it supports the theory that an epic squeeze is imminent ?

You can go around paywall by copying it's heading and pasting it into the Google search.

 

[TMSE]

Great info for a possible short term trade. I expect some good reports coming out in the next 2 days. Based on this I bought my first weekly calls in a long time. I will exit them quickly and go back to long term strategy.

I still question the stock price after Q2 as I am convinced it will not be good and (IMO..I am often wrong) that this has not been fully priced into the SP.

Isn't stock price based on future expectations? I think Q3 guidance will drive the stock price.

In the model S/X delivery threads, I see a lot of reports wherein current Q3 deliveries are 2 weeks earlier than planned. Contrast this with Q2, when a lot of S/X deliveries were postponed by 6 weeks in mid April.

IMHO, Q3 will be a watershed quarter for Tesla. As soon as market gets a hint of it, we might see significant move up. There are three major catalysts I see in the next 10 days:

1) Gigafactory reveal
2) July sales estimates for NA by Inside-EV. I don't vouch for them, but market believes them. I expect it to be very good.
3) Q3 delivery/production guidance in the earnings call.

 

[MitchJi]

You can go around paywall by copying it's heading and pasting it into the Google search.

Thanks!

Hedge Funds Use Borrowed Shares to Influence Company Votes
A recent Wall Street Journal article entitled “How Borrowed Shares Swing Company Votes” looked at the practice by hedge funds and other private investment firms of borrowing shares of publicly traded companies specifically for the purpose of influencing the outcome of proxy votes. The article cited situations where public company shares were borrowed (and voted) by persons whose interests may have been in conflict with those of the company.

In several circumstances, it was noted that this strategy potentially allowed speculators to profit from rapid changes in the stock’s price after the outcome of a particular vote is released to the public. It was also noted that third parties seeking to influence the outcome of such votes have often used this strategy to hide their voting power until the last moment. Typically, the individual shareholder doesn’t even realize their stocks, and their voting rights, have been borrowed from their brokerage accounts until it is too late.

This practice (termed “empty voting”) while legal, has piqued the interest of the SEC and has rekindled a long debate over stock lending practices. Below is a simplified example of how the practice works:

1. A hedge fund borrows the voting stock of a publicly traded company before the announced “record date” to be eligible to vote the stock at the next stockholder’s meeting;
2. The fund typically will put up collateral for the borrowed stock and pay a fee to the lending broker once the shares are transferred to its account(s);
3. The borrowed shares are then “voted” at the stockholder meeting;
4. The borrowed shares are then returned to the lender after the record date.

NYSE IM 07-08 recently reminded members that when customers with margin accounts have a debit balance, member organizations pursuant to their margin agreements with such customers, have the right to hypothecate or lend the shares subject to certain limitations. When the shares are lent under the standard stock loan agreement, the right to vote the shares goes with them. If a corporate vote takes place while the shares are on loan, the margin customer may be unable to vote them. Thus, member organizations need to provide effective disclosure to customers regarding the possibility of their losing proxy voting rights for securities held in margin accounts. Most member organizations have chosen to address this disclosure within the customer margin agreement.

In response to this trend, some pension funds have recently become reluctant to loan out their shares to short sellers due to their concerns that those shares may be voted in a manner that is inconsistent with the goals and objectives of the fund.

Currently, the SEC has no firm plans as to how they may address the issue, although some foreign regulators have begun studies to look into the problem. SEC Chairman Christopher Cox is quoted as saying that this practice “is almost certainly going to force further regulatory response to ensure that investor interests are protected”.

Denfinitly confirms that the funds need to recall their shares to vote. If your goal is to accumulate TSLA shares the best strategy might be to buy SCTY calls, with a ~December expiration, and exercise the options at or near the peak, then wait for your SCTY shares to be converted TSLA shares.

 

[N5329K]

Kind of funny, isn't it. Just a few years ago, society was concerned that we were reaching the peak amount of oil we could produce, and that concern now seems to have given way to the concern that we're reaching the peak amount of oil we *want*.

I'm more interested in what happens to the other automakers. I think that once Tesla reaches the ability to provide as many Model 3's as the market will buy, the other automakers will have a very limited time to play catch up without dying. I'm especially concerned by the way a few of them are stubbornly sticking to their guns on FCEVs despite the mounting evidence showing that BEVs are better.

There are parallels to be drawn to the cell phone industry. Nokia and Blackberry were the kings of the castle, until Apple and Android came along, and turned the industry on its head. A couple of the older powerhouses like Samsung were able to adapt and survive, but Nokia and Blackberry changed too little, too late, and have been left in the dust. I expect the EV revolution to be the same. Some incumbent brands will adapt and survive, and some will be left behind if they don't adapt fast enough.

"The Stone Age didn't end because they ran out of stones."
Robin

 

[AlMc]

Apple Appoints Longtime Lead Engineer Mansfield to Run Car Project, Says WSJ

 

[sub]

Apparently the recall activity lately went down significantly, so it seems that today's run up is driven by news, probably a combination of reassurance of progress in TSLA / SCTY due diligence over the weekend and the press event at the GF tomorrow.

Ihor Dusaniwsky on Twitter

I would like to know how he gets this information?

 

[jhm]

Tesla Semi

I've created a new thread devoted to the Tesla Semi business. I'd like us to move the conversation there. A few good summary posts would be helpful to gather the good ground we've already covered here.

This will be a long-term discussion that deserves it own thread. And a suspect a few readers here will appreciate returning to truly short-term issues.

 

[austinEV]

Can someone confirm something for me? On July 1 TM ended the RVG, so full quarter Q3 will not have the nasty accounting. But, RVG is still grandfathered in for prior sales right? So GAAP will look a lot better in Q3, but not insanely so as they move all those liabilities into sales as a one time thing? Still good in the sense that those old sales' RVG expiring will slowly be additive to... sales, cash flow?

Slowly over time as they expire, or all-at-once correction? I am gathering that the answer is slowly over time as they expire.

 

[vgrinshpun]

I would like to know how he gets this information?

Try to tweet at him to get an answer, but my guess is that it is done using live contemporaneous analysis of the transactions. He is head of the research at the financial analytics firm.

 

[Papafox]

I see strong support at 220 and resistance at 230. If we can break through 230 it will be the opening we need to go higher if we can hold it.

 

[racer26]

Can someone confirm something for me? On July 1 TM ended the RVG, so full quarter Q3 will not have the nasty accounting. But, RVG is still grandfathered in for prior sales right? So GAAP will look a lot better in Q3, but not insanely so as they move all those liabilities into sales as a one time thing? Still good in the sense that those old sales' RVG expiring will slowly be additive to... sales, cash flow?

Slowly over time as they expire, or all-at-once correction? I am gathering that the answer is slowly over time as they expire.

If I understand how the accounting works correctly:

New sales will no longer have RVGs available, and so no more cars will be sold and then accounted immediately as a liability for half their value. This is good, as a percentage of sales in previous quarters looked like they were essentially a negative value to the company.

In addition, since the RVG program began in mid-2013, Q3 is when we should see the earliest ones reaching maturity at 36-39 months, and so we should see those 50% of car liabilities start coming off the balance sheet and finally counting. To GAAP principles, it will appear as though the deferred 50% of those cars sold with RVG in mid-2013 were actually sold now. This effect will accelerate as the sales did from 2013-2015.

 

[ggr]

I don't have access to the complete article, but I gather it supports the theory that an epic squeeze is imminent ?

Here's a different link: "How borrowed shares swing company votes," The Wall Street Journal, January 26, 2007 | Shareholder Coalition

I won't even give WSJ my email address, let alone sign up.

After reading this article I called my broker (ETrade) about it. The guy I spoke to told me that I got to vote the shares even if they were loaned out; I told him I didn't believe him. He put me on hold while he went off to talk to his manager, and now they're off talking to the trading desk and going to call me back... In the meantime I asked to move all my SCTY shares into my other (non-margin) account. I don't have enough cash to move my TSLA shares, though. I have to think about how to do that. They can't tell if the shares have been loaned out, and have no mechanism (other than taking them out of the margin account) to ensure that they're not.

 

[Fast Laner]

2......hundred...aand..............thiiiiiiiiiiiirty!!!!!!!

 

[larmor]

Here's a different link: "How borrowed shares swing company votes," The Wall Street Journal, January 26, 2007 | Shareholder Coalition

I won't even give WSJ my email address, let alone sign up.

After reading this article I called my broker (ETrade) about it. The guy I spoke to told me that I got to vote the shares even if they were loaned out; I told him I didn't believe him. He put me on hold while he went off to talk to his manager, and now they're off talking to the trading desk and going to call me back... In the meantime I asked to move all my SCTY shares into my other (non-margin) account. I don't have enough cash to move my TSLA shares, though. I have to think about how to do that. They can't tell if the shares have been loaned out, and have no mechanism (other than taking them out of the margin account) to ensure that they're not.

That's ok-- a few years ago, banks repackaged mortgages and had no idea where they came from....

 

[Yggdrasill]

Wohoo!

 

[MitchJi]

More details:
What happens to the voting rights on shares when the shares are used in a short sale transaction? | Investopedia

The registered owner of the security, known as the holder of record, is the investor who retains voting rights. This means the holder of record is entitled to vote on any corporate action that is decided upon by shareholders. (For further reading, see What Are Corporate Actions?) When it comes to short sales, the problem that arises is determining who is the holder of record on the shares being shorted.

To understand the flow of voting rights, it is important to first understand the short sale transaction itself. Shares that are available to be shorted come from three sources: the brokerage firm's inventory, another customer's account, or another brokerage firm. The only shares that can be taken from other customer accounts are those from margin accounts. When opening margin accounts, investors enter an agreement with the brokerage firm that their shares can be loaned out, but they still maintain their position in the security.

The short sale transaction starts with the investor inputting an order to short the shares by calling his or her broker or entering the trade online. The brokerage firm then finds the shares from one of the aforementioned three sources and sells the shares in the market; the proceeds are transferred to the account of the investor going short. The position is then closed out when the investor repurchases the equivalent amount of shares and they are returned to the brokerage firm.

To understand who is the holder of record, and thus who retains the voting rights, you just need to follow the shares. Initially, the shares are held by one of the three sources. Whichever source initially held the shares was also the holder of record. When the shares were used in the short sale transaction, the initial source lost its voting rights as it was no longer the holder of record. Even the margin account customer who holds the shares long will lose his or her voting rights in this situation - this is part of the margin account agreement...

The shares are then sold in the market, and the investor who purchases these shares becomes the holder of record for these shares, thus controlling the voting rights. The investor going short does not get the voting rights. When this investor closes his or her short position, the shares are returned to the brokerage firm, and the voting rights return to the initial owner whose shares were used in the short sale.

 

[racer26]

2......hundred...aand..............thiiiiiiiiiiiirty!!!!!!!

Reminds me of watching darts on TV when someone scores 180.

 

[sundaymorning]

$230s, long overdue.