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

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wait... what do you mean "till you sell" ? What is the cost basis for the $274 new share? I suppose it should be 1/5 of my original cost, right? And if the original is long term, then the dividend is long term, right?
If the new 4 shares suddenly become "Short Term", then it is definitely a bad deal.

This "not regular split" but "dividend" thing really drives me nervous.



https://taxmap.irs.gov/taxmap2016/pubs/p550-006.htm

"Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return."

It lists exceptions right below that but none would apply here


Further-

https://taxmap.irs.gov/taxmap2016/pubs/p550-026.htm#en_us_publink100010540

"The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock."
 
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But isn't this assuming the share is worth the same and hence that $1.5 must be repaid by the short seller?

No.

The share price doesn't matter. Why would it?

If I borrow a share from you when the price is $500, and it goes up to $1000, or down to $200, I still only owe you one share of stock

The price doesn't change that.


But if the share is no longer worth that, then the short seller doesn't have to pay anything back no?

Again- the price of the share is irrelevant.

If you borrow shares from someone, and sell those shares, and those shares earn a dividend while you haven't repaid them, you owe the full dividend to the lender.

The dividend in this case is 4 shares of stock for every 1 you borrowed.

No matter the price.


You are not adding 4 additional shares as added value dividends, but it's that your shares are worth 1/5th as much and Tesla is giving you the other 4/5 back.

Tesla isn't giving the short anything.

Tesla isn't giving the share lender anything either.

NEITHER holds a registered share of stock at this point.

The guy who BOUGHT the share from the short gets the 4 shares dividend from Tesla.


As a condition of you giving up being the registered owner and lending your share out, you require the borrower (the short) to PAY YOU ANY DIVIDENDS the stock you lent him would have received- even though neither of you own it when that happens.
 
So here's my interpretation of this last move from Elon and how it is designed to screw the shorts. Please correct me if I'm wrong.
In a normal stock split, one share automatically becomes 5. Say, Chanos borrowed a share from me and sold it. Post split, it is automatically recorded that he borrowed from me 5 shares on a post-split basis. Whenever he chooses to cover, he can just buy 5 shares for the price of 1 and return those to me.
When it is done via a stock dividend, things become dark. Shareholders actually receive 4 new shares for every share they own. Post split, it is still recorded that Chanos owes me only 1 share. The sequence of this whole affair is as follow:
I owned my share
Chanos borrowed my share, now I'm no longer the holder on record
Chanos sold it to someone else, now neither Chanos nor I remained the holder on record
So on 8/21, neither one of us is entitled to the 4 new shares. Yet, Chanos still owes me only 1 share, which means he has to come up with those 4 shares to deposit in my account at the end of August. So, he is forced to cover.
Although that doesn't stop them from re-shorting the stock once it's all said and done, but a forced covering is still a thing of beauty.
So @ihors3 says 10.53M shares short (on Aug 7th), so at current volumes that would take a couple of days for the shorts to cover, if that was the only trading happening. In reality they have a few weeks in which to cover, so it will probably only add about 1M shares/day to the trading. But then there's the snowball effect of pushing the price higher, so they need to cover as soon as they can, so...

Edit: another way to look at it. Tesla will issue 4*186M new shares. But the broker's books will show an extra 4*10.53M shares owned either by the owner of record or the lender. 10.53/186 ~= 5.6% of the new shares that are unaccounted for, and that will come straight from the shorts, one way or another. So, because TSLA is so heavily shorted, there actually is a value increase of about 5% per share. I think.
 
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Does not look good for 2020: :eek:

View attachment 495413
/S :p

Cheers!

Sparta Coming Soon (Okay, well it took 8 mths...) :D

tesla-sparta-coming-soon-2020-png[1].png


Cheers!
 
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



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 :oops:


But, if you’re right, and Tesla can make this happen for $745k, then I’m 100% ok with them ear-marking incoming Tesla Short Shorts revenue to fund the transaction.

In fact, I would buy many Tesla Short Shorts to support this shorting of the shorts.
 
No.

The share price doesn't matter. Why would it?

If I borrow a share from you when the price is $500, and it goes up to $1000, or down to $200, I still only owe you one share of stock

The price doesn't change that.




Again- the price of the share is irrelevant.

If you borrow shares from someone, and sell those shares, and those shares earn a dividend while you haven't repaid them, you owe the full dividend to the lender.

The dividend in this case is 4 shares of stock for every 1 you borrowed.

No matter the price.




Tesla isn't giving the short anything.

Tesla isn't giving the share lender anything either.

NEITHER holds a registered share of stock at this point.

The guy who BOUGHT the share from the short gets the 4 shares dividend from Tesla.


As a condition of you giving up being the registered owner and lending your share out, you require the borrower (the short) to PAY YOU ANY DIVIDENDS the stock you lent him would have received- even though neither of you own it when that happens.
This is an interesting discussion, but I believe, when August 28 comes, every short, instead of being 1 share short, will be 5 shares short at, theoretically, 1/5 the price. Consider: 1) if there were a cash dividend owed by the shorts, they could simply pay what is called an -in-lieu-of dividend to the original owner of the stock; 2) if Tesla spun off say the charging network to existing shareholders in the form of a new security, shorts would have a problem because they cannot short a stock which heretofore did not exist; 3) in the case of a stock dividend they can simply be 5 shares short an existing security, instead of one.
 
If the Lucid Air truly gets an EPA range of over 500 miles, that would negate much of the supercharger network advantage that I thought Tesla would enjoy for many years. For most people, they rarely travel over 400 miles in a day, much less 500. I've always said that the best way to eliminate the ONLY deficiency that EVs have to ICEs (refuel time when traveling) was to increase range to a number that would mean no refueling was be necessary for almost any trip. 517 miles isn't quite it, but it's not very far off. It does drastically reduce the requirement to charge at all while travelling. I know most of the trips I'm willing to make by ground could easily be done one way on 500 miles.

And even when charging does become necessary, it potentially significantly reduces the time you spend charging since you may only need a little more juice to make it to your destination. For example, if you are traveling 550 miles, you would only need to stop some time during the 2nd half of your trip to add around 100 miles. If you're only getting 400 miles of range, that would need to increase to 200 miles (which would also take longer proportionately since charging slows as capacity is filled). This is what I have always tried to tell the "200 miles of range is all you need" people like Fred Lambert - it may be all you NEED, but it's mighty inconvenient when traveling.

With those things said, I will not hold my breath on that range being a reality. We've all heard the mighty range promises - none have ever been fulfilled (except Tesla). Also, I've always believed that Tesla has not shown their hand when it comes to range because, well, why would they if they are already well ahead of everyone else?

Last thing I will opine on this is just to say that I was telling a friend Sunday that Tesla needs to start racing their cars in some capacity. The one thing anyone that races will tell you is that racers are EXTREMELY competitive. They will use all the ingenuity they find to get an advantage. No one will find more advances in battery technology than engineers working on electric race cars. Ironically, today, Lucid announces 517 miles of range - giving credit to the battery technology they developed where?......at the race track providing batteries for Formula E.

It will not be a surprise for Tesla to announce a higher capacity battery pack for Model S/X during Battery Day, and to match the Lucid Air range, or go close in a much cheaper car.

The other advantage of a bigger battery pack is faster charging, likely to be compounded but improvements announced at Battery Day

What is most likely IMO is a much slower taper, maintaining a peak rate of charge, or something closer to it for longer.

I'm not going to dismiss or criticize the competition, lots of good EVs are coming. If Tesla innovation slowed down, some of them might match or even exceed Tesla in some areas. But I remain confident that Tesla will stay a few steps ahead.

The mission is accelerating, Tesla doesn't do slow acceleration.
 
I think that Rob nails it when he says he was putting together an episode on the possible split and was suggesting 69:1 because of the amusement value. He's certainly right that it would have conveyed that Tesla was doing a split while expressing ironic contempt for the whole Wall St. thing.