Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Gigapress]

To the extent that the efficient market hypothesis is true, a stock split would have no impact on a stock price. As far as I’m aware, most rigorous studies have found no consistent effect from stock splits.

However, there are some reasons to expect TSLA may be an exception.

• TSLA is an outlier on the stock market in that it has an unprecedentedly colossal amount of options trading. As reported by the Financial Times in this article last November:

“The nominal trading value of Tesla options has averaged $241bn a day in recent weeks, according to Goldman Sachs. That compares with $138bn a day for Amazon, the second most active single-stock option market, and $112bn a day for the rest of the S&P 500 index combined.”​

In case you missed it: TSLA in the COVID/Robinhood/WallStreetBets/Meme Stock era has as much options trading as the entire rest of the S&P 500! The stock split is about to reduce the minimum price of calls and puts by a factor of 3. There’s a big difference in the number of investors interested in a $3000 contract than a $1000 contract, especially considering Tesla’s unusually high retail investment interest and even more exceptional interest from young investors (like teens and twenty-something’s) who barely have any money but collectively have a lot of money and risk appetite.​

• There are probably enough believers in technical analysis and in the social psychology surrounding stock splits that the expectations of a stock split driving a bullish run could become a self-fulfilling prophecy, especially for a company like Tesla which has an unprecedentedly large and connected community surrounding the company and investing in it.

• A non-negligible portion of the investor population does not understand the difference between a share price and market capitalization, especially amongst the aforementioned young novice investors. According to @farzyness, who says he taught casual lunchtime personal finance and investing classes while he was at Tesla, said he was surprised how many employees interested in maxing out their stock options didn’t know about these kind of investing fundamentals, and Tesla employees are now one of the biggest investor demographic groups for TSLA stock.

• Human emotions at a primal level do not react the same way to a $900 share price vs a $300 price, even if the person consciously knows they should be looking at the price in the context of total shares outstanding and total earnings expectations. Few companies grow enough after IPO to get to the point that they have a share price around $1000, so Tesla is in rarified air here. I’m not sure that enough companies have gotten to this point to even have enough of a sample size for doing a historical study. Currently almost all of the top 100 large cap stocks have share prices below $400, with the majority between roughly $80-350 (link).

• To the extent that transactions are actually lumpy batches in the underlying mechanics of trading on the stock exchange, increased trading liquidity from increased share count may increase volatility in general. TSLA already is unusually volatile for a large cap stock and has a lot of trading volume.

• To the extent that Tesla’s unprecedentedly large options market is causing an unprecedentedly large amount of naked short selling by market makers, a split might force them to scramble to buy real shares, thus initiating a short squeeze and potentially a second-order effect of squeezing from delta and gamma hedging. If I remember correctly, @Artful Dodger wrote extensively about this hypothesis around the time of the last split. I’m not personally sure if this is a real effect but it’s at least plausible in my opinion.

• TSLA is the most-watched stock on the market (and if I had to guess without hard data, most-watched in the 4 century history of joint-stock corporations) and the split generates increased attention which could increase volatility. Furthermore, if the audience for those articles/videos/radio discussions ends up being biased towards attracting new investment on the bull side, the share price would tend to rise. Most of the media attention seems to be neutral or positive on the stock split for TSLA, so it’s plausible that it would cause increased buying pressure.

 

[winfield100]

Mary Barra heard Tesla was splitting and announced they will split their stock 37 times by the middle of the decade. GM will be the industry leader in splitting with a higher share count than any other auto maker. By 2030, they will split 50% of their shares per year.

Stellantis announced that they aren't splitting now, but in 3 years when they do split, it will be the best performing split, bettering the splits of all of the competition.

VW was going to split their stock, but then Diess left so they decided to do a reverse split instead.

(Sorry... I'm done... I'll go home now)

@ogr
you may be confusing GM with AXPW / AXPWQ that was touted by our old friend and TSLAQ afficionado, Johan Bitterson.
if i recall correctly , it did at least 3 Reverse splits (or more) that came to a 1:700,000 and still way under a fraction of a penny

unless you are talking reverse splits.........

 

[henchman24]

Couple articles

Stock splits can be profitable for investors. Here are five companies that might perform well if they split their shares.

Stock splits are a sign of confidence by management.

www.marketwatch.com

Stock Splits Actually Work—Just Not for the Reason Everyone Thinks

Years of data show positive results for companies that split their stocks. That’s puzzling for anyone that believes in a rational market. Here’s how to make sense of stock splits.

www.barrons.com

What Is a Stock Split?

A stock split occurs when a company divides its outstanding shares into more shares. This action reduces the price per share but increases the number of total shares.

www.thebalance.com

Most scholarly publications are behind paywalls where you need a login… I know Cambridge has a ton (I have a login for that one). You find references to them in many articles on the subject.

 

[Electroman]

@ogr
you may be confusing GM with AXPW / AXPWQ that was touted by our old friend and TSLAQ afficionado, Johan Bitterson.
if i recall correctly , it did at least 3 Reverse splits (or more) that came to a 1:700,000 and still way under a fraction of a penny

unless you are talking reverse splits.........

Some may not know who you are referring to. It is the infamous John Petersen. One of the original master TSLAQ member, writing hit piece after hit piece proclaiming Tesla is dead and Musk is fraud in Seeking Alpha. His articles got plenty of clicks and comments. And then he vanished one day never to be seen again in any forum. This guy predates Montana Skeptic and other scums.

 

[Electroman]

@ogr
you may be confusing GM with AXPW / AXPWQ that was touted by our old friend and TSLAQ afficionado, Johan Bitterson.
if i recall correctly , it did at least 3 Reverse splits (or more) that came to a 1:700,000 and still way under a fraction of a penny

unless you are talking reverse splits.........

It appears that AXPW has been delisted? Wow how much our dear friend, JP lose?

 

[Boomer19]

in regards to split dates and other details.
decent general description by Al Root, via Gary Black

https://twitter.com/x/status/1559983812565770240

 

[Artful Dodger]

45 mins to closing cross - what a tug of war!

Oh yah, like a 1-D game of Chess. /s

 

[jkirkwood001]

The sad part is that so many people will be purchasing non-Tesla EVs in the future, end up having horrible experiences at non-Tesla EV charging stations, think that all EV charging is the same, and go back to their ICE in frustration. We know the better alternative is already here.

We gotta keep spreading the message!

 

[Singuy]

The sad part is that so many people will be purchasing non-Tesla EVs in the future, end up having horrible experiences at non-Tesla EV charging stations, think that all EV charging is the same, and go back to their ICE in frustration. We know the better alternative is already here.

I believe after the early adopters of non Tesla ev buyers are exhausted, the rest of the buyer rely on word of mouth. Their number 1 issue is charging and their reliability. All Tesla owners rave about the charging network being a stable feature for owning a Tesla. The other owners can't share the same feeling and talks about how companies try to pay them off incase their car burns their house down.

And once Tesla opens up their network, non Tesla buyers will talk about how you can use the Tesla network. However first time buyers would rather get a Tesla because they feel teslas are meant to be charged on Tesla chargers.

 

[Skryll]

Tesla currently is supporting PG&E with the virtual power plant, 2342 homes with powerwalls currently pushing at a rate of 15MW into the grid in aggregate during this event from 6pm to 9pm PST, 10kW from my home. Super exciting, first time eve for teslar. Hope this gets some press and how it helped.

Demand response failed California 20 years ago; the state's recent outages may have redeemed it from 2020 mentions similar efforts from other companies, I wonder how this compares.

 

[elasalle]

1/4 (getting to like iPhone numbers ...)

https://twitter.com/x/status/1560069684728561664

 

[elasalle]

https://twitter.com/x/status/1560071988919431168

 

[Gigapress]

Regarding the Dan O’Dowd child mannequin test…if we give the benefit of the doubt and say FSD was actually activated and the result wasn’t fraudulent.

The FSD software has to decide how to maximize safety. Slamming on the brakes is hazardous, but it is worthwhile if, for instance, a child is directly in the path of the car. It is detrimental to safety to do a hard stop if, for example, a harmless plastic object is directly in the path of the car.

The test was the latter situation, but the premise of the test was that it was representative of the former situation with a real human child.

Is it possible that FSD Beta correctly classified the mannequin as harmless plastic road debris and not a person, based on the appearance of the mannequin and context clues, such as its inhuman total motionlessness, and made the correct risk minimization decision to keep going instead of decelerating aggressively?

 

[SmokyPeat]

Anyone else feel like a big push up is coming tomorrow? Feels to me like $950 is within grasp. Just seems like there's a perfect storm of catalysts that won't allow the stock to be held down for much longer. Spring decompression time!

 

[thesmokingman]

Anyone else feel like a big push up is coming tomorrow? Feels to me like $950 is within grasp. Just seems like there's a perfect storm of catalysts that won't allow the stock to be held down for much longer. Spring decompression time!

I'm patiently waiting for the fireworks to go off like the rally in 2020 before the split. History tends to repeat itself right?

 

[Paul_SF]

Anyone else feel like a big push up is coming tomorrow? Feels to me like $950 is within grasp. Just seems like there's a perfect storm of catalysts that won't allow the stock to be held down for much longer. Spring decompression time!

 

[SN_8]

Technical analysis examines share price and volume movements. It becomes especially insightful when fundamental company news is sparse. TA suggests what some inside investors might know or others believe. It’s track record is good enough that computerized trading algobots have been taught to understand and act upon it. This further amplifies its predictive ability. Ultimately, fundamentals control the share price. But on the path to a match with fundamentals, technical analysis can be helpful in foreseeing the zigs and zags in getting there. It’s imperfect, but I would not advise ignoring it.

Very well said. You should really write a book.

 

[Gigapress]

I think the real question here is around how the Model Y would be classified, the dollar limits are pretty clear but this is what the bill says about the limits + vehicle classification



The EPA classifies the Model Y as a "Small Sport Utility Vehicle" and the Model X as a "Standard Sport Utility Vehicle". I think the Model X fitting in as an SUV is a given, but does the Model Y belong in the same grouping as trucks and vans with an $80k limit?

That feels a bit iffy, it'll be interesting to see how this plays out

Model Y is definitely an SUV, a type of light truck, according to EPA regulations. See my post from earlier this week quoted below for details and link to the relevant section of the Code of Federal Regulations.

You want to know why?

The unethical jerks running the car manufacturing companies that aren’t Tesla (or Rivian) lobbied the US Federal Government long ago to have different CAFE (Corporate Average Fuel Economy) standards for “light trucks” than for “passenger cars” and this ultimately led to an expansion of the “SUV” category to cover most car sales in America, even for wagons that are not really aligned the original meaning of the term “sport utility vehicle”, which meant a vehicle with truck chassis that was intended for heavy duty off-road driving. Thus, here in the land of the free, vehicles like Model Y which are used almost exclusively for on-road passenger transportation by nearly all those who drive them are actually classified as light trucks instead of passenger cars so that they’re legally allowed to pollute more without fines on the manufacturer. God bless America.

The NHTSA (National Highway Transportation Safety Agency) defines the CAFE regulations in 49 CFR Part 531 for passenger cars and Part 533 for light trucks. As of 2010, the last year the calculation was one simple number, the requirement for cars was 27.5 miles per gallon fleetwide average but for light trucks it was 23.5 mpg. 17% difference.

The Department of Transportation will likely apply the same EPA classification definitions for the EV tax credit, which would make the Model Y meet the criterion for SUV under $80k.

My apologies for posting more unbridled optimism.

Corporate Average Fuel Economy | NHTSA

Corporate Average Fuel Economy standards regulate how far vehicles must travel on a gallon of fuel. Learn more about CAFE & vehicle miles per gallon.

www.nhtsa.gov

The NHTSA and EPA websites say that Model Y is an SUV.

2021 TESLA MODEL Y 5-SEAT SUV RWD | NHTSA

www.nhtsa.gov

2022 Tesla Model Y Long Range AWD

Fuel Economy of the 2022 Tesla Model Y Long Range AWD. Compare the gas mileage and greenhouse gas emissions of the 2022 Tesla Model Y Long Range AWD side-by-side with other cars and trucks

www.fueleconomy.gov

According to what Rob Maurer showed 9 days ago, which I’m pretty sure is the version of the bill that passed today’s vote, the text says:


Rob then says that the most likely outcome is that the Secretary would choose classifications aligned with what the EPA already uses, and I think so too.

The EPA definitions are in:
US Code Title 40 (Protection of Environment)
—> Chapter I (Environmental Protection Agency)
—> Subpart Q (Energy Policy)
—> Part 600 (Fuel Economy and Greenhouse Gas Emissions of Motor Vehicles)
—>Subpart A (General Provisions)
(link)

Model Y fits the definition of SUV and I also learned that it isn’t a station wagon because it doesn’t have a tailgate which the regulations include as the distinguishing characteristic of that compared to an SUV.

 

[The Accountant]

I'm patiently waiting for the fireworks to go off like the rally in 2020 before the split. History tends to repeat itself right?

My hunch is that we’ll see it on Monday - 3 days before the split…… but I’m happy to see the rally tomorrow

 

[mongo]

Model Y fits the definition of SUV and I also learned that it isn’t a station wagon because it doesn’t have a tailgate which the regulations include

Rehash:
'Tailgate' isn't the differentiator, tailgate isn't even defined. Though in common usage, it's a hatch that opens downward.
The SUV/ station wagon difference is they are sub categories of light truck vs passenger vehicles (mutually exclusively).
Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

Also, I think the Rob interpretation is off. This is going in the tax code so, by default, Secretary referes to 'of the Treasury'. Sec of Labor and Sec of Transportation are both fully named in the amendment.

For the purposes of this paragraph [regarding price limits for various vehicle types], the Secretary [of Transportation who is currently Pete Buttigieg] shall prescribe such regulations or other guidance as the Secretary determines necessary or appropriate for determining vehicle classifications.