Short-Term TSLA Price Movements - 2016

[dakh]

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"

So I went back to see if I grok this math correctly again. Why did you assume institutional investors lended much at all? Half of retail investors cover majority of short interest. I'm sure there are institutional investors who enjoy the interest more that they want to vote too.

I'm not saying anything about where the share price is going but the math doesn't look too support major levels of recall activity.

 

[generalenthu]

I don't think that there's a clear reason for shorts to try to vote.

Yes, for SCTY shorts, against the TSLA deal. Worth keeping in mind that SCTY has a higher short interest than TSLA, %age wise of course.

 

[geneclean55]

I don't think that there's a clear reason for shorts to try to vote.

But beyond that I think that a significant number of the institutions will want to vote. To do that they need to call in their shares. Even a few institutions, e.g. Fidelity calling in their shares should have a big impact on the SP. The only way this doesn't happen IMO is if shorts start exiting now, which given the massive short interest will still force a nice bump in the SP.


Long dated opinion prices respond to ST changes in the SP. If they didn't you could buy LEAPS for less than shorter term options.

Thinly traded options, usually those that are long dated can take some time to respond to price action. So i guess it depends on how temporary the spike is.

 

[tander]

I highly doubt this.

We're now almost 1/3 of the way through Q3, and they haven't even announced the vote yet. The vote will be at least 2-3 weeks off from the announcement to give the big players time to recall their shares, and then after the vote there would be time to put all the ducks in a row. Early Q4, methinks.

I agree, if I remember from the conf call they said the vote would go through a month or two after the deal was approved, and then a quarter or two after that the "synergies" would start to show. So maybe they'll try to have a really great looking 3rd quarter before SCTY makes the financials look all crazy. But who knows, they also said the deal would have been approved a week or two ago.

Regarding the vote, how much time do they really need to recall the shares? Can you just recall them, vote and lend them out again all in the same day?

 

[drinkerofkoolaid]

Long dated opinion prices respond to ST changes in the SP. If they didn't you could buy LEAPS for less than shorter term options.

I think you're half right. The premium for LEAPS is sometimes almost completely arbitrary, and the spread is usually very wide. Open interest for LEAPS is usually very low.

 

[tander]

Not a theory, plain fact. Q3 will be extra stuffed a bit from these extra cars in transit. So yes, the financials will be pumped up a bit. How much this will "shock" it will be is anyone's guess since this is hardly hidden and anyone can model it and "price it in" for Q3 expectations.

Not sure what "good surprise" you are referring to for next week though. It would be a q3 surprise in November.

Surprisingly outside of TMC it seems like people are still shocked to realize that Tesla can actually make money on it's cars. Another thing which sort of fits into Q3 expectations is that if a fair amount of those 5k in transit cars were for North America, Tesla might have it's best month ever when the numbers get posted next week.

 

[sunhelm]

ABL as I recall, cannot be used for this purpose. It gives them some cash before delivery yes, but it's not "free" cash flow. They use ABL to measure operational cash flow.

Thanks! So free cash flow definition is sort of detrimental to Tesla's vehicle delivery model. In the Clean Technica article by Julian on GAAP impact due to lifting of the RVG beginning July, he argued that following established GAAP/FASB principles do not necessarily depict an accurate portrayal of the money flow. So in that same vein, I think the FCF measure is also not an accurate depiction of TSLA's financials, and their measure - cash flow from core operations, give a more realistic financial snapshot.

 

[drinkerofkoolaid]

What's the link to info about the Press tour of the Gigafactory? Is it tonight?

 

[150 kWh]

Depends on timing. Long-dated SCTY options will become long-dated TSLA options at an equivalent (post-adjustment factor) price.

Are you sure about this options conversion? My understanding is that all OTM SCTY calls will expire worthless on the day of acquisition.

 

[MitchJi]

Yes, for SCTY shorts, against the TSLA deal. Worth keeping in mind that SCTY has a higher short interest than TSLA, %age wise of course.

First of all since the big institutions are in favor of this trying to change the vote would probably be an exercise in futility.

Most shorts think that the merger is bad for Tesla and SCTY but if it fails see it as a blow to Elon, so why would they decide that they've got a large enough incentive to spend massive amounts of money voting?

Even if they decide they want to do that, in the middle of span epic short squeeze, how would they be able to buy the shares?

 

[AlMc]

What's the link to info about the Press tour of the Gigafactory? Is it tonight?

We’re in Reno/Sparks this week for Tesla Gigafactory Opening, starting tonight

 

[generalenthu]

First of all since the big institutions are in favor of this trying to change the vote would probably be an exercise in futility.

Most shorts think that the merger is bad for Tesla and SCTY but if it fails see it as a blow to Elon, so why would they decide that they've got a large enough incentive to spend massive amounts of money voting?

Even if they decide they want to do that, in the middle of span epic short squeeze, how would they be able to buy the shares?

SCTY shareholders prefer this deal more than TSLA shareholders. So agree with you that it is going to be hard to swing this vote from the SCTY side.

 

[BornToFly]

If Shorts believe that SCTY is doomed, and TSLA looses money on every car they sell, they should be praying the merger goes through. It means they get richer faster....

 

[dandurston]

Mark Spiegel is loving the share price action today:

 

[dakh]

Tesla might have it's best month ever when the numbers get posted next week.

Huh? Did I miss they do monthly instead of quarterly numbers now?

 

[SBenson]

If Shorts believe that SCTY is doomed, and TSLA looses money on every car they sell, they should be praying the merger goes through. It means they get richer faster....

That is exactly what many vocal shorts have said!

 

[CALGARYARSENAL]

I just want to apologize for some off color vocabulary today. I will keep it clean from now on. It was unacceptable. Cheers gang.

 

[dc_h]

I highly doubt this.

We're now almost 1/3 of the way through Q3, and they haven't even announced the vote yet. The vote will be at least 2-3 weeks off from the announcement to give the big players time to recall their shares, and then after the vote there would be time to put all the ducks in a row. Early Q4, methinks.

August 19th is my early prediction for the vote.

 

[tander]

Huh? Did I miss they do monthly instead of quarterly numbers now?

Monthly Plug-In Sales Scorecard

Not sure if there are any international reports elsewhere.

 

[MitchJi]

Mark Spiegel is loving the share price action today:

I must admit TSLA never fails to astound me. I have a friend with 40 years of pro shorting experience who says he's never seen anything like it.

Doing the same thing and expecting a different result is the definition of insanity!