Short-Term TSLA Price Movements - 2016

[schonelucht]

Seriously! Who are Srini and Drivin and why do they both keep disliking my posts at the same time? Are they the same person? What gives?

You sure seem bothered about receiving a few dislikes for a guy who dishes them out themselves so easily.

 

[schonelucht]

So apparently Musk had to put up new shares as collateral. Is that where the new short shares are coming from?

 

[AlMc]

An Arbitrage Question:

Preface: I believe many of us come here to share opinions and facts and have discussions so that our collective knowledge may give us an edge as retail traders over the big firms on WS.

Factual It has been established that the acquisition of SCTY by TM will be done so at a ratio of 1 share SCTY to 0.111 shares of TSLA.
Currently, that has led to a rather glaring arbitrage situation where buying SCTY at roughly $18.50 effectively will get you a
share of TSLA at the equivalent of $170.

Question: This is common knowledge. WS could pile in on SCTY pushing the price up to a point close to mirroring TSLA SP.
Why aren't they doing it?

My thoughts:
1. They don't care (unlikely)
2. They feel the deal won't go through
3. They feel that SCTY goes bankrupt before the sale goes through
4. They feel SCTY is far less valuable than what TM is paying for it so the acquisition by paying in shares actually will cause
real dilution of TSLA and a loss in value down to $170

Personally, I believe WS thinks #4

Agree? Disagree? Am I missing something?

 

[JBRR]

An Arbitrage Question:

Preface: I believe many of us come here to share opinions and facts and have discussions so that our collective knowledge may give us an edge as retail traders over the big firms on WS.

Factual It has been established that the acquisition of SCTY by TM will be done so at a ratio of 1 share SCTY to 0.111 shares of TSLA.
Currently, that has led to a rather glaring arbitrage situation where buying SCTY at roughly $18.50 effectively will get you a
share of TSLA at the equivalent of $170.

Question: This is common knowledge. WS could pile in on SCTY pushing the price up to a point close to mirroring TSLA SP.
Why aren't they doing it?

My thoughts:
1. They don't care (unlikely)
2. They feel the deal won't go through
3. They feel that SCTY goes bankrupt before the sale goes through
4. They feel SCTY is far less valuable than what TM is paying for it so the acquisition by paying in shares actually will cause
real dilution of TSLA and a loss in value down to $170

Personally, I believe WS thinks #4

Agree? Disagree? Am I missing something?

5. They expect that if 2. happens SCTY will go to 0. If 2 happens say 10% of the time you have to calculate that into your arbitrage.
I.e - Expected value of arbitrage = 0.9*18.5/0.11-0.1*18.5*0

Most likely that is the reason for the wide wide trading spread between SCTY and TSLA. Downside of merger not going through is much bigger than in usual mergers.

 

[Seesaw]

I think it's 2.. It's not a done deal

 

[schonelucht]

If you hold shares and they announce a merger you think is detrimental for the company. Do you 1) sell you shares 2) keep your shares to vote no. Consider that option 1) will get you out of a deal you don't like 100% sure, option 2) will suck you into that deal 90% certain. It's a done deal because everyone (that includes me btw) who'd vote no picked option 1) instead and is looking to enter again at a lower price point after the market realises that the value of the company postdeal is indeed lower than before.

 

[pGo]

An Arbitrage Question:

Preface: I believe many of us come here to share opinions and facts and have discussions so that our collective knowledge may give us an edge as retail traders over the big firms on WS.

Factual It has been established that the acquisition of SCTY by TM will be done so at a ratio of 1 share SCTY to 0.111 shares of TSLA.
Currently, that has led to a rather glaring arbitrage situation where buying SCTY at roughly $18.50 effectively will get you a
share of TSLA at the equivalent of $170.

Question: This is common knowledge. WS could pile in on SCTY pushing the price up to a point close to mirroring TSLA SP.
Why aren't they doing it?

My thoughts:
1. They don't care (unlikely)
2. They feel the deal won't go through
3. They feel that SCTY goes bankrupt before the sale goes through
4. They feel SCTY is far less valuable than what TM is paying for it so the acquisition by paying in shares actually will cause
real dilution of TSLA and a loss in value down to $170

Personally, I believe WS thinks #4

Agree? Disagree? Am I missing something?

Agreed. And hence the recent gap and movement. The baggage that comes with scty is a lot. It's not just $2.4b dilution but constant support scty will require - pay loan terms, interest, build factory.

Overall, looking at past two years or so, shareholders $200 share has not appreciated but the company valuation has gone higher from 23b to 30b while Elon earning full payout on MX. Now they are more worried that an instant 10% dilution would require more support than realized before.

Option 4 is likely but if it happens , it will put even more clouds on Elons ability and will show that he's desperate. Say if the deal closes, but doesn't show much benefits which I think will be the case highly, there may be lawsuits to drag this thing and focus will be taken away.

 

[150 kWh]

An Arbitrage Question:

Preface: I believe many of us come here to share opinions and facts and have discussions so that our collective knowledge may give us an edge as retail traders over the big firms on WS.

Factual It has been established that the acquisition of SCTY by TM will be done so at a ratio of 1 share SCTY to 0.111 shares of TSLA.
Currently, that has led to a rather glaring arbitrage situation where buying SCTY at roughly $18.50 effectively will get you a
share of TSLA at the equivalent of $170.

Question: This is common knowledge. WS could pile in on SCTY pushing the price up to a point close to mirroring TSLA SP.
Why aren't they doing it?

My thoughts:
1. They don't care (unlikely)
2. They feel the deal won't go through
3. They feel that SCTY goes bankrupt before the sale goes through
4. They feel SCTY is far less valuable than what TM is paying for it so the acquisition by paying in shares actually will cause
real dilution of TSLA and a loss in value down to $170

Personally, I believe WS thinks #4

Agree? Disagree? Am I missing something?

As soon as you enter your arbitrage trade your profit is locked. Price fluctuations of both stocks doesn't matter for you anymore. Poor performance of SCTY is caused by combination of #2 and #3.

 

[CALGARYARSENAL]

@Papafox You have a gift of blaming short sellers, manipulators or weak longs for whenever the SP drops but never poor management decisions, missed deadlines etc...its always the uninformed evil short seller thats to blame for the sell off so I was expected your post & you didn't disappoint so I got a nice chuckle.

I don't have a public comment on the "epic" short squeeze theory some of you have been relentlessly pushing here, if it works out for you guys after all this due diligence then congratulations & you deserve the profits if it fails then it would be nice admitting you were totally wrong.

I like Papa and most everybody on here. I respect their views and their contribution is leagues above mine. But yes, the infatuation with short sellers is over the top. Lets hold Musk and company accountable, not short sellers.

 

[dalalsid]

I made some charts of Tesla's progress since the launch of the Model S for a seeking alpha article (which got rejected) but don't want all the effort wasted so I'll share here:

 

[Yggdrasill]

Elon Musk definitely makes some bad decisions from time to time. Like the autopilot blog he said he would post within ~12 hours and then blew off. Why set yourself up to fail like that?

But it is a fact that there is a lot of short-manipulation going on. The important stuff for Tesla's valuation is all several years into the future, and shorts are filling the time between now and then with as much FUD as possible.

 

[NikeWings]

Thanks a lot for posting the above link to the article. Here is an interesting quote from the article:
'[...] and Wednesday’s regulatory filing showing he has put up an additional $489 million of his Tesla and SolarCity stock as collateral to secure personal borrowings. The pledged shares are stripped out of his total net worth calculation because they’re not immediately available to him. The borrowing is for personal liquidity; he doesn’t even accept the $37,584 minimum-wage salary Tesla is required to pay him.'

What could be the purpose of this money?
Positive: EM wants to add to his SC position again.
Negative: EM needs the money for SpaceX after the latest incident with the Facebook satellite destroyed?
Any thoughts?

Edit:
Any chance that these are the additional shares that have been added to shares available to short?

I interpreted the quote as more a collateral (margin) call on his existing personal borrowings, than him netting incremental cash. So the shares would not be liquidated into the market but just an increase in pledged shares and therefore a reduction to his net worth. It's a vague statement though.

 

[CALGARYARSENAL]

Crappy non farm payroll this am was a gift to us.

 

[Nate the Great]

I made some charts of Tesla's progress since the launch of the Model S for a seeking alpha article (which got rejected) but don't want all the effort wasted so I'll share here:

Why did they get rejected?

 

[Runarbt]

Why did they get rejected?

Wild guess: They need to keep their bear:bull ratio above 100:1 ?

 

[vgrinshpun]

I like Papa and most everybody on here. I respect their views and their contribution is leagues above mine. But yes, the infatuation with short sellers is over the top. Lets hold Musk and company accountable, not short sellers.

What's wrong with both keeping Tesla team accountable AND keeping an eye on what short sellers are up to? Isn't this what makes us collectively more educated investors, traders and anybody in-between OR both? Why such an urge to shut topics that of no interest for somebody personally (this is not directed at you, hence a general wording)? I have to say that I am at loss with finding rational explanation to the *infatuation* with shutting down the discussion.

BTW, after being 0 the whole yesterday afternoon, shares available to short at Fidelity are 17,962, estimated interest steady at 11.5%. These will probably be shorted on the open or soon afterwards.

 

[CALGARYARSENAL]

What's wrong with both keeping Tesla team accountable AND keeping an eye on what short sellers are up to? Isn't this what makes us collectively more educated investors, traders and anybody in-between OR both? Why such an urge to shut topics that of no interest for somebody personally (this is not directed at you, hence a general wording)? I have to say that I am at loss with finding rational explanation to the *infatuation* with shutting down the discussion.

BTW, after being 0 the whole yesterday afternoon, shares available to short at Fidelity are 17,962, estimated interest steady at 11.5%. These will probably be shorted on the open or soon afterwards.

Hey man.....you guys are doing a great job. Just frustrated at the stupidity of the market moves. Carry on!

 

[NikeWings]

Media wonks pimping Teslas name for clicks. I bit, but nothing new here.
4 Reasons To Bet Against Tesla

 

[FredLambert]

I made some charts of Tesla's progress since the launch of the Model S for a seeking alpha article (which got rejected) but don't want all the effort wasted so I'll share here:

Your first chart is not really accurate. While the Tesla Supercharger has a power output capacity of 145 kW the Model S can not take that full capacity and it is capped at 120 kW.

There are only 2 things that changed since the Model S was introduced. It was first capped at 90 kW, then upgraded to 120 kW. And as for the Superchargers, it was first capable of 120 kW, then 135 kW, and finally 145 kW.

 

[vgrinshpun]

BTW, after being 0 the whole yesterday afternoon, shares available to short at Fidelity are 17,962, estimated interest steady at 11.5%. These will probably be shorted on the open or soon afterwards.

Yep, from 17,962 to 0 available for shorting shares in one minute (0 shares available at 9:31am)