Short-Term TSLA Price Movements - 2016

[esk8mw]

Like clockwork, a bottom-feeder plaintiff's law firm announces an "investigation" into the terms of the deal and it triggers a minor algo selloff. For those unfamiliar, with every M&A deal (and I mean literally every single deal) a plaintiff's firm launches an "investigation" and files a shareholder derivative suit claiming that the deal price is too low or too high. Angry investors sign up thinkiing they will recoup their losses and the scummy firm tries to extract a settlement from the companies in the deal. Not wanting to drag out to expensive litigation, the companies often pay off the firm a tiny amount to make them go away. Angry investors get a tiny slice of the tiny settlement and remain angry.

Disclaimer: I admire many plaintiff's firms and believe they serve a critical function in the legal system. The ones filing strike suits like this exist only to line their own pockets, drive up deal costs and get in the way of companies' legitimate operations. They are the worst.

 

[ajax]

This is from the Form 8-K submitted to the SEC:

"Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of SolarCity common stock, par value $0.0001 per share (the “SolarCity common stock”) issued and outstanding immediately prior to the Effective Time (other than shares of SolarCity common stock owned by SolarCity as treasury stock or owned by Tesla or Merger Sub, which will be cancelled) will be converted into the right to receive 0.110 (the “Exchange Ratio”) shares of Tesla common stock, par value $0.001 per share (the “Tesla common stock”)."

The 8-K says the conversion will take place at the "effective time of the Merger." Does anyone know what that means? Is it the date of the shareholder vote?

 

[Lessmog]

The 8-K says the conversion will take place at the "effective time of the Merger." Does anyone know what that means? Is it the date of the shareholder vote?

Almost certainly later, after proper confirmation. IANAL. (Others here are.)

 

[esk8mw]

The 8-K says the conversion will take place at the "effective time of the Merger." Does anyone know what that means? Is it the date of the shareholder vote?

Effective Time usually means when the deal closes after all votes etc. have taken place. The day SCTY ceases to exist.

 

[vgrinshpun]

Not sure of that data for traditional dealers, but IMO it makes sense that Tesla would have a much lower conversion rate to a sale as so many of their galleries are now in malls and locations that are a destination among themselves which is going to grab more of the window shopping and curious crowd. This is great for brand awareness but I doubt they get a lot of "impulse" sales from this model. At least yet.

But certainly good for more consumer/mainstream products going forward like TE and SCTY products?

I definitely agree that conversion rate should be lower for Tesla than for the regular dealerships as very few would visit the dealership unless they are actually thinking about buying a car in a short order, while there would be plenty of visitors in Tesla stores that are not necessarily planning to purchase a car short term.

Nevertheless, I think that getting a comparison with the conventional dealers will be informative, but my googling on the subject did not yield any usable information...

 

[Oil4AsphaultOnly]

Jesus Christ

What did you buy more stock already?! Aren't you supposed to warn us before doing so?

 

[Jayjs20]

What did you buy more stock already?! Aren't you supposed to warn us before doing so?

I actually did.

Luckily, I bought at 232. I still reserve the right to be annoyed though.

 

[FredTMC]

TSLA seems to be just largely following Nasdaq direction

 

[AlMc]

Yes, TSLA is following the Nas, but what is the next big catalyst that we know about: Q2ER/CC. Most feel that it will not be good 'short term' news. Most people could be wrong but I will be very surprised to see a run up to the ER. More likely we see some selling pressure.

First ER in two years I have no options. I admit, it is a lot less stressful.

 

[jhm]

I am disappointed that the exchange rate fell below the offered range of 0.122 to 0.131 down to 0.11. This is based on trading over the last 5 trading days so it reflects a willingness to accept the market's relative valuation of both companies. It is a fair procedure, but I do wish that the offer had been clear about basing the exchange rate on market prices. At least we can say that whatever one may have bought or sold the two stocks at last week was pretty much at market value with respect for the acquisition deal.

What is curious now is that even as the market knows what the final exchange rate will be, pending shareholder approval and go-shop provision, it still prices TSLA at a $5.50 (= 232.86 - 25.01/.11) premium to SCTY. This spread is not that far off from what we saw most of last week when I and many others so the exchange rate closing near 0.122.

 

[MitchJi]

Thankfully I was wrong! When I discovered that the SCTY acquisition had been announced and that both SP's were down I assumed that there would be pages of Elon's an idiot posts to wade through.

What I found interesting in the SCTY pre-announce:

#2 of that seems to be solar shingles indeed... So this is an interesting situation where SCTY does look like it has a bright future, TSLA has gone up and the offer coefficient has been now fixed.

Silevo's panels!

Long term, TSLA could be a monster. But I had it all planned out, anything above 52wk high nets me a M3 possibly in time for launch. Now I would need TSLA to hit $573. That's going to take a while.

Between the MS-MX production finally being on track, TE ramp, the effects of a successful SCTY Merger, and a successful M3 ramp I think your chances are reasonable of this happening. You have the advantage that you won't need the money until the M3 is in production which should boost the price by itself. Good luck!

What company on this planet is positioned to offer a stationary solution to Solar City of the same scale and breadth as Tesla? With a comparable world mission/headed in the same direction? With better groundwork laid for batteries? With a better sales and distribution network now and in the future? That's as keen on vertical integration, And has financial backing to see it all through?

I'll wait...

You forgot the ability to increase the production of Silevo's panels.

Listening to the call this morning, the other thing they said that stuck out to me was that they had every intention of announcing the record date well in advance of voting.

I missed that. Are you sure?

With all the effort going into the MTBTM, TSLA should be able to scale Model 3 at a ridiculous rate once the profit starts rolling in. Standing up a new factory is a matter of duplicating the machinery (mostly robot arms) and hiring more people to run it.

No. Even when they get to 3.0 Tesla factories are going to be like products, constantly improving.

So, do I have this correct?

3). Shareholder vote will happen sometime in Q4 (for SCTY and TSLA shareholders)

So, if tons of shares get recalled before the vote and result in an increase in TSLA stock price, then SCTY shareholders get that higher price.

TSLA Squeeze prices will go down as soon as the voters don't need their shares.

Not sure of that data for traditional dealers, but IMO it makes sense that Tesla would have a much lower conversion rate to a sale as so many of their galleries are now in malls and locations that are a destination among themselves which is going to grab more of the window shopping and curious crowd. This is great for brand awareness but I doubt they get a lot of "impulse" sales from this model. At least yet.

But certainly good for more consumer/mainstream products going forward like TE and SCTY products?

.
And customers get educated about EV's.

Plus it's an enjoyable experience compared to having a tooth pulled.

 

[jhm]

Oil is just at the verge of dropping below the psychologically important threshold of $40/b. It's at $40.05. I expect some resistance at this level, but if oil pushes well below, we could see negative oil sentiment re-emerge as weight on Tesla share price.

 

[vgrinshpun]

TSLA Squeeze prices will go down as soon as the voters don't need their shares.

This bet is far from certain, especially given that the vote will most likely happen in Q4, after the Q3 ER... My bet is that there will be a wholesale market adjustment (up) of TSLA given a demonstrable ability to be profitable and ability to self finance huge expansion of the company's future revenues.

 

[hoang51]

Yes, TSLA is following the Nas, but what is the next big catalyst that we know about: Q2ER/CC. Most feel that it will not be good 'short term' news. Most people could be wrong but I will be very surprised to see a run up to the ER. More likely we see some selling pressure.

I too, would be surprised if there was a mini run up before the ER/CC. At this point, it looks like stay out of TSLA and buy again when everything settles down after ER/CC.

 

[MitchJi]

TSLA Squeeze prices will go down as soon as the voters don't need their shares.

Or a little earlier.

I've have been focused on the the shares held by the institutions that directly loan shares, who have conflicting interests. They want to vote, to maximize their income from interest payments in the short term (collect the payments as long as possible before calling in their shares), and not antagonizing their short customers, a longer term interest. I think either way they wait unti near the deadline to call in their shares.

Another group are funds like pension funds that vote. I assume that they are collecting interest and will want to maximize that income? Again wait.

So the time available for shorts to cover is now until the voting date, minus a few days for share ownership to clear. So I believe that the squeeze will probably be gradual. But I don't think it's possible to unwind all of the current short interest without putting upward pressure on the SP.

It also occurred to me that if I held a substantial number of shares that instead of trying to prevent them being loaned out it might be a better strategy to find the broker who would pay the most to loan my shares. If you can get 5-8% risk free profit from shorts borrowing your shares it seems kind of compelling to me.

 

[FluxCap]

What I found interesting in the SCTY pre-announce:



#2 of that seems to be solar shingles indeed... So this is an interesting situation where SCTY does look like it has a bright future, TSLA has gone up and the offer coefficient has been now fixed.

Btw is it fixed now? If TSLA were to run to $300 now would the ratio adjust to keep at 2.6B$ or is it now in stone and would go up with TSLA share price?

Mario! Good to hear from you, and thanks for thoughts. I had not even considered solar shingles but that would sure fit the definition of "beautiful roof" that Elon mentioned. Combined with positive solar stock movement from a hypothetical Democratic US election win, and it could look like the SCTY buy was an amazing deal for Tesla and TSLA shareholders.

 

[ggr]

I asked how much to date, he gave sort of a long winded answer so it's possible he had a different timeframe in his head. I too was surprised. He is one of the battery engineers working in Palo Alto, but had only been with the company for a few months, so maybe things were scrambled - it was also after midnight.

That sounds a lot like the Q1 number. If he told you the real number for Q2, before the earnings come out, he'd be (rightly) in a lot of trouble.

 

[sunhelm]

Lots of good info in this morning's conference call on the board approval of the merger. Did not have time to digest but these stood out:
- Customer acquisition of solar panels will focus on ownership (outright purchase or rolled over with house mortgage (shift the risk to banks!), lease will still be there just to be consistent with the car model, giving that option to the customer if they so choose)
- On collaborating on an in-house inverter, Elon did not specifically answer but glad JB chimed in highlighting Tesla's core competency in power electronics, specifically their charging technology and built in inverters in the motors which they hope to leverage.

 

[GBleck]

24.61 solar city now. Isn't this below price? Arbitrage opertunity?

 

[Mario Kadastik]

24.61 solar city now. Isn't this below price? Arbitrage opertunity?

24.67 right now, which at 0.11 ratio implies 224.27 for TSLA, which is trading at 231.5. So if you are 100% confident the deal goes through, then yes. Arbitrage opportunity. Sell 11 TSLA and buy 100 SCTY and you make 70+$.