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

[vikings123]

In Tesla's case, a split helps the company in issuing shares to potential future employees, as part of SBC (Stock-Based Compensation). Basically, it increases the number of shares, so instead of getting 20 shares after 1 year or 3 years, you get 100 shares in the same time period.

It just sounds better.

I don't understand the excitement:
1) We're still well under $1500
2) S&P may now have a good excuse to wait until after Sep 1 to add Tesla to the S&P 500.

Everything remains the same from a dollar standpoint. This stock split and the subsequent euphoria just goes to show you how irrational the market right now is. I'm wondering if the real reason AAPL is up 15% is the 7 for 1 stock split and not the great earnings.

I definitely think a stock split will bring in more retail investors who think TSLA is too "expensive". I'm surprised they did not do a 10 to 1 though.

Tomorrow should be very interesting.

 

[willow_hiller]

anyone here have hard evidence that a dividend of shares vs a split doesn't negatively impact LEAPS?

Found some guidance on Fidelity about stock dividends: Option contract adjustments - Fidelity

"A special stock dividend is a dividend payment made in stock versus cash. The holder of an option contract will have the same number of contracts at a reduced strike price. The option contract will now represent the original share value plus the stock dividend."

 

[woodisgood]

Tesla is the “people’s stock” as much as there could ever be such a thing.

The people need to feel like they can own a piece. The shares are more important and meaningful to own than the cars.

 

[vikings123]

I have to imagine that the timing of this has something to do with S&P inclusion and the fact that the S&P committee has been in touch with Tesla management. Why else move up the date of it when Elon already said it would be a topic for the Annual share holders meeting. I was kind of convinced we weren't getting S&P inclusion until Sept. Not so sure about that now.

Or the talks did not go well and Elon basically flipped his middle finger to S&P. S&P lost a great chance to add TSLA during the recent consolidation. There is never a dull day in TSLA's history.

 

[Christine69420]

So if the split triggers a price rally would that happen post split from August 31st?

If so - would this rally be something S&P500 want to be in on - or don't they care?

 

[Zaxxon]

This stock split does mean that the shares that I bought at 420 and 888.88 will lose their cachet. Utterly. I'm devastated. Inconsolable.

On the bright side, you now have the opportunity to buy them a 2nd time.

 

[Knightshade]

Found some guidance on Fidelity about stock dividends: Option contract adjustments - Fidelity

"A special stock dividend is a dividend payment made in stock versus cash. The holder of an option contract will have the same number of contracts at a reduced strike price. The option contract will now represent the original share value plus the stock dividend."

Yeah shouldn't really matter for options folks as there's no "on dividend distribution" obligation like there is with shorts.

Well, beyond the impact of slightly more in commissions I guess since you pay them 5 times now instead of 1 if the contracts change hands.


But for the shorts dividend vs. "split" makes a huge difference far as I can tell.

 

[woodisgood]

So if the split triggers a price rally would that happen post split from August 31st?

If so - would this rally be something S&P500 want to be in on - or don't they care?

If AAPL is any indication, the rally happens before the split. I’m not sure why any short would hang on right now.

 

[madodel]

On the bright side, you now have the opportunity to buy them a 2nd time.

That might be what pushed Elon to do this. $420.69 - Begin the countdown on August 31.

 

[Mich]

"Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020"

What happens between Auf 21 and Aug 31? Why should I buy TSLA on Auf 22 for 1500 if I'm not eligible for the 4 shares of dividende?

 

[woodisgood]

Rob, Dave, Gali, we need videos. Come on boys!

 

[theschnell]

Found some guidance on Fidelity about stock dividends: Option contract adjustments - Fidelity

"A special stock dividend is a dividend payment made in stock versus cash. The holder of an option contract will have the same number of contracts at a reduced strike price. The option contract will now represent the original share value plus the stock dividend."

This is extremely helpful. So options holders are ok, but those short the stock still have to provide the dividend in the form of shares on August 31. They would like to hope those shares are available at 1/5 the price, but they may or may not actually be available at the price on the 31st...

 

[EVortex]

Gary Black has posted some thoughts on Twitter. Based on research, stocks perform better after splits.

I have been through a few stock splits and in my experience it did help the stock value increase, but seems mostly psychological.

 

[kengchang]

"Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020"

What happens between Auf 21 and Aug 31? Why should I buy TSLA on Auf 22 for 1500 if I'm not eligible for the 4 shares of dividende?

Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable

What happens if I buy or sell shares on or after the Record Date and before the Ex Date?
If you sell shares on or after the Record Date (August 24, 2020) but before the Ex Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split.

If you buy shares on or after the Record Date but before the Ex Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.

 

[Mich]

"Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020"

What happens between Auf 21 and Aug 31? Why should I buy TSLA on Auf 22 for 1500 if I'm not eligible for the 4 shares of dividende?

So my understanding is that the dollar value will or should change on August 22, but the actual numbers of share to trade will stay the same till August 28.

 

[MABMAB]

 

[WarpedOne]

This must be the worst day in shorts history...
Shorting in effect increases the float. Say Tesla issued 200M shares, and 10% of them are now shorted. The float is thus 220M.
Tesla announces 5:1 split in a form of a dividend so it issues 4 shares for every existing one: 4 x 200M = 800M new shares.
But the float is expecting to receive 220x 4 = 880M of new shares. Where will those missing 80M come from?
Tesla did not issue them, shorts will have to use magic or buy them on the open market in the next 10 days.

This might get ugly...

 

[MP3Mike]

Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable

What happens if I buy or sell shares on or after the Record Date and before the Ex Date?
If you sell shares on or after the Record Date (August 24, 2020) but before the Ex Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split.

If you buy shares on or after the Record Date but before the Ex Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.

Just to be clear that is for AAPL and not TSLA. The AAPL split is a standard split not a stock dividend, so it may, and probably will, work differently.

 

[SoGA Fan Club]

"Lucid CEO Peter Rawlinson, who led development of the Model S while working for Elon Musk, has said the Air will outmatch Tesla's sedan in terms of interior luxury, dash from 0 to 60 mph in 2.5 seconds, and start at more than $100,000."

Lucid Motors' $100,000 luxury sedan is now 'the world's longest range electric vehicle,' smashing the record set by Tesla's Model S

Right. That's inline with what I stated.

 

[engle]

If it's "really" a dividend, the shorts owe whoever they borrowed from 4 shares of stock. On dividend day.

Not "whenever they feel like covering the original share"

That's a massive difference.

Or could be the dude who wrote the press release and used both "dividend" and "split" even thought those are fundamentally different in a subtle but real accounting sense just screwed up.

When somebody "borrows" 1 share to short TSLA, that share they "borrowed" will get 4 extra shares so IMHO they have now effectively "borrowed" 5 post-split shares each worth the post-split 1/5 price on the effective date. Someone please correct me if I am wrong...

OT: I love my new basis (psychologically)! My original position from Thursday, 8/4/2011 will become $5.02 per share. Bought that after Troy Jones loaned me an original roadster to test drive at the original Menlo Park location. When I returned, I immediately reserved a Model S, but ended-up getting a very early Model X P90D. My average basis will become $30.20. Thankfully about 69% of my holdings are now in tax-free Roth IRAs (not that I ever plan to sell them for the foreseeable future).