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

[woodisgood]

If it were true that you could flush shorts by using a dividend split rather than traditional, why wouldn’t every company do it?

Either there’s a downside to company or shareholders we’re not seeing or there’s actually no difference in terms of effects on shorts.

 

[juanmedina]

My goal was to have 1000 shares.... that was easy

 

[M|S|M MYP]

1.2 million shares traded AH....me thinks volume will be a tad better tomorrow than what we've been seeing over the past 3 trading days

 

[Knightshade]

If it were true that you could flush shorts by using a dividend split rather than traditional, why wouldn’t every company do it?

Either there’s a downside to company or shareholders we’re not seeing or there’s actually no difference in terms of effects on shorts.

Most companies don't have enough short interest to care.

Tesla does.

There IS a difference on back end accounting (a split doesn't even require a journal entry for the splitting company- a dividend does) but it doesn't change the valuation of anything for real shareholders.

 

[jerry33]

does this “Dividend” mean I still have the same number of shares after the split or do I have 4 times my amount now like most splits? I’m confused as to the dividend language here.

If you had 5 shares, you will now have 20. The beauty of this is if the stock price goes up $1 before you would have increased $5, now you will increase $20.

 

[jerry33]

If it were true that you could flush shorts by using a dividend split rather than traditional, why wouldn’t every company do it?

Either there’s a downside to company or shareholders we’re not seeing or there’s actually no difference in terms of effects on shorts.

Most companies have far fewer shorts than Tesla, so the effect isn't worth bothering about.

 

[smorgasbord]

I'm thinking I made a lot of California people mad with this post.

Why come y'all don't ever get mad at Elon when he says the same thing?

When it comes to assembling cars in factories: Georgia, Texas, Nevada, etc., knock yourself out.
We'll keep the lion's share of the innovation and design jobs here.
As a California resident (transplant from the East Coast), I hope you keep posting.

Economically speaking, Y'all best hope California doesn't secede from the union.

This is satire, but it's true at the same time:

 

[ABCTG]

It's been a while since I last refreshed on this, but I'm fairly confident there is no effective difference between a normal stock split and a dividend stock split -- it's just semantics and mechanics based on the state of incorporation.

Apple and Tesla are different because they are incorporated in different states.

Apple is a California corporation and the California corporate directly contemplates stock splits. In other words, you don't need to "dividend" out the extra shares.

Tesla is a Delaware corporation and it mechanically requires a dividend to implement a stock split.

That's it.

Correct;

https://sec.report/CIK/0000320193 Apple Inc. is a registered with the U.S. Security and Exchange Commission and incorporated in the state of California.

https://sec.report/CIK/0001318605 Tesla, Inc. is registered with the U.S. Security and Exchange Commission and incorporated in the state of Delaware.

 

[Sofie]

If you had 5 shares, you will now have 20. The beauty of this is if the stock price goes up $1 before you would have increased $5, now you will increase $20.

thank you! So maybe the difference between this and a normal stock split lies mainly in options trading and shorting the stock? I just hold my 427 shares. So now that’s going to be 2,135 shares after the price per share split.

 

[UnknownSoldier]

If you had 5 shares, you will now have 20. The beauty of this is if the stock price goes up $1 before you would have increased $5, now you will increase $20.

This is some wild math.

It's a 5 for 1 split, you will have 5 times the shares.

 

[mrmage]

How do you go about finding these? Which ones if any did you buy last Friday or Today?
The breakeven on your long call is something you expect to be below the share price by that date.
On the calls in your post I am quoting, what position changes did you have to go with?

Not sure what you mean about finding these. I just check prices for spreads by looking up call prices. Sometimes a call spread's short leg (higher strike) and the long leg are both below the SP while still yielding > 100% profit if SP stays the same.

In hindsight, waiting until today would have been better. But the idea is to buy at pre-set SPs and times when call premiums are favorable, without guessing whether the SP or timing are good.

 

[Favguy]

If you had 5 shares, you will now have 20. The beauty of this is if the stock price goes up $1 before you would have increased $5, now you will increase $20.

No, your math is wrong! If you had 5 shares, you will now have 25, not 20! It's 5 to 1, 4 dividend shares and you still have the original.

 

[Ameliorate]

For the average shareholder, the net effect seems the same. But there definitely appear to be some mechanical differences for derivatives, accounting, (and potentially short sellers).

My understanding is that under a 5:1 stock split, you receive 4 additional options contracts for each 1 you presently hold. But if the Fidelity guidance I linked above applies to this situation, a 4 share stock dividend reduces your option strike price by 80% and represents the original shares plus the dividend shares while you hold the same number of contracts.

Some higher ups in my bank got back to me on this. Said not to worry, I would have 5x the amount of calls on the 28th, monetary value will remain the same. "The wording is largely a formality and equivalent to just a straight stock split at a specific ratio"

edit - I also put in a request for clarification to Tesla IR. Will let you all know if I get a response.

You have to think too, a lot of employees hold options. I doubt Tesla would hurt them in any way.

 

[Sofie]

This is some wild math.

It's a 5 for 1 split, you will have 5 times the shares.

I know; but I was confused on the “dividend payout” phrase.

 

[MP3Mike]

Correction I mean 1708 shares

You were correct the first time.

 

[Sofie]

You were correct the first time.

just deleted that post! I realized! Thank you!!!

 

[willow_hiller]

Correct;

https://sec.report/CIK/0000320193 Apple Inc. is a registered with the U.S. Security and Exchange Commission and incorporated in the state of California.

https://sec.report/CIK/0001318605 Tesla, Inc. is registered with the U.S. Security and Exchange Commission and incorporated in the state of Delaware.

Reading into the Delaware code, sounds like it could be ambiguous whether this is a plain split or a dividend: TITLE 8 - CHAPTER 1. General Corporation Law - Subchapter V. Stock and Dividends

No corporation shall pay dividends except in accordance with this chapter. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock. If the dividend is to be paid in shares of the corporation’s theretofore unissued capital stock the board of directors shall, by resolution, direct that there be designated as capital in respect of such shares an amount which is not less than the aggregate par value of par value shares being declared as a dividend and, in the case of shares without par value being declared as a dividend, such amount as shall be determined by the board of directors. No such designation as capital shall be necessary if shares are being distributed by a corporation pursuant to a split-up or division of its stock rather than as payment of a dividend declared payable in stock of the corporation.

So if Tesla designates capital equal to the outstanding shares times the dividend amount times the par value of the stock designated in their charter, it's treated as an actual dividend. Otherwise it's treated as a stock split.

Looking at the charter tsla-ex31_1396.htm the par value for common shares is $0.001 per share. With 186.36 million outstanding shares, releasing these shares as a dividend would cost $745,440 (186360000*0.001*4).

EDIT: I'm probably misinterpreting this. It's probably just a stock split

 

[M|S|M MYP]

This is some wild math.

It's a 5 for 1 split, you will have 5 times the shares.

Potato...Potatoe.... just waiting for post-split...battery day, Q3 numbers and then:

 

[JusRelax]

Some higher ups in my bank got back to me on this. Said not to worry, I would have 5x the amount of calls on the 28th, monetary value will remain the same. "The wording is largely a formality and equivalent to just a straight stock split at a specific ratio"

edit - I also put in a request for clarification to Tesla IR. Will let you all know if I get a response.

Did you ask what, if anything, happens to the shorts?

Please tell me they used the word 'burn' somewhere in their response...

 

[willow_hiller]

Did you ask what, if anything, happens to the shorts?

Please tell me they used the word 'burn' somewhere in their response...

All I know is that for all the cheerful confusion we're experiencing right now, the shorts are experiencing panic.