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

[InDaClub]

Tesla boosts turbocharged stock with plan for 5-for-1 split

SAN RAMON, Calif. (AP) — Tesla will split its stock for the first time in its history so more investors can afford to buy a stake in the electric car pioneer following a meteoric rise in its market value.

The five-for-one stock split announced Tuesday won’t change how much Tesla’s business is worth, but will automatically reduce the price of its shares by 80% when it’s completed on Aug. 31.

The sharp drop in price per shares creates a wider universe of potential investors and also often has the psychological effect of making it seem as if a stock is on sale. Those factors often spark rallies after a split is announced. For instance, Apple’s stock price has surged by 14% since the iPhone maker disclosed a four-for-one split less than two weeks ago.

Now, it appears Tesla is about about benefit from the same phenomenon. The company’s shares surged 6% to $1,459 in extended trading after the news about the split came out.

It marks the first time that Tesla has split its stock since the Palo Alto, California, company went public at $17 per share a decade ago. Any investor who bought $10,000 worth of stock at that IPO price and would now have stock worth about $860,000.

 

[MP3Mike]

The share lender has to be given 4 real voteable shares, they can't be "fake" non-voteable shares like the one they are holding in place of what they lent out.

But, after thinking about it some more I think the broker will just handle this for the shorts in the background. There are plenty of shares available to borrow, so the broker will just borrow 4x more shares and deliver them to the lenders, and then update the shorts account to reflect that they lent those out as well. And once they have delivered those shares to the lender they can then borrow and lend them out just like the original shares.

 

[mekberg]

Funny how the sentiment on this board turns so quickly....earlier today, we were arguing (I mean discussing) the range of the Lucid AIR and how the range is BS and the testing was biased, etc, etc.....now look at us all....one big happy f**kin family again waiting to gather and have some brews

Bunch of fickle cats.

 

[bballshinobi]

Right, I understand that, but doesn't this demonstrate the point that Knightshade is trying to make? Borrower has to give the lender whatever the dividend the company issues. If it's cash, then it's cash. If it's some gimmicky digital share, then fake bitcoin you buy. If it's 4 shares of TSLA, regardless of price, you need to provide. At the very least this will require a shortseller to close 4/5 of his short position on 8/28 right before opening new ones on 8/31, right?

 

[Highway2Heel]

A peek inside the Jimmy “Pop” Chanos short position...

 

[Artful Dodger]

I love it! 1400+$ is a *lot* of money for me. This will make it much easier for me to add to my position.

Funny or not, with the Canadian / USD exchange rate, and at 50% appreciation per year, by 2023 Canadians would not be able to add even 1 single share of TSLA (~USD4,500) with their yearly allowance (~CAD6,000) for increased contributions to their Tax Free Savings Account (TFSA).

This is a BIG DEAL for Canadians who want to invest in US Equities that don't pay cash dividends. Without a series of suitably timed stock splits, growth in TSLA would cut off from investments from TFSA hodl'ers! And you know how we Canadians like to save!

Cheers!

 

[oldTAVguy]

That's not a split though, very different

They called it a Split, because it has the effect of a split, but they are legally implementing it as a Dividend. I'm absolutely sure that that news release and the filing with the SEC were crafted by the BEST legal minds.

 

[Curt Renz]

Tesla Daily - today:

 

[Artful Dodger]

Does this help with liquidity for S&P inclusion?

...only if @Unpilot coughs up some shares.

 

[oldTAVguy]

The share lender has to be given 4 real voteable shares, they can't be "fake" non-voteable shares like the one they are holding in place of what they lent out.

But, after thinking about it some more I think the broker will just handle this for the shorts in the background. There are plenty of shares available to borrow, so the broker will just borrow 4x more shares and deliver them to the lenders, and then update the shorts account to reflect that they lent those out as well. And once they have delivered those shares to the lender they can then borrow and lend them out just like the original shares.

They will make the shorts PAY and PAY for that service. It would be easier for them to just call the shares back before it get complicated.

 

[printf42]

Just checked $TSLAQ again, awfully quiet, the only few who’s speaking already lost their mind.

Even this is a normal split, statistic shows they have a lot of pain coming.

And if on the tiny little chance this is not just a split, I won’t mind any tax or options implications, because the firework would be splendid.

This tweet caught my eyes:

Funny thing is, it’s actually true.

 

[Chunky Jr.]

I don't think it is a coincidence that 1:5 == 4:20

 

[oldTAVguy]

Just checked $TSLAQ again, awfully quiet, the only few lost their mind.

Even this is a normal split, statistic shows they have a lot of pain coming.

And if on the tiny little chance this is not just a split, I won’t mind any tax or options implications, because the firework would be splendid.

This tweet caught my eyes:
View attachment 575221
Funny thing is, it’s actually true.

You almost always pay more per ounce for the smaller container.

 

[dl003]

No. If this was a dividend like you are saying then longs should be getting 4 additional shares too at today’s SP, not the split adjusted price.

Even if I were to assume what you are saying is remotely possible do you really think Elon with all his 4D chess skills would have waited until now. Heck he would have announced the split instead of the releasing the short shorts. Sorry but what you are saying makes no sense.

I saw this on twitter and it sums it up really well.

Remember: this doesn't create more pizza, just more slices


View attachment 575199

Think about it. It's a dividend. We really are going to get the new shares. Tesla does not dictate the stock price. It simply gives each of us 4 new shares for every share we own. The market is going to be the one sorting it out. The market is the one saying that each share is now worth 20% because there're 5x the shares but zero additional paid-in capital. From Tesla's perspective, the share price pre- and post-split is irrelevant.

 

[JRD1]

Right, I understand that, but doesn't this demonstrate the point that Knightshade is trying to make? Borrower has to give the lender whatever the dividend the company issues. If it's cash, then it's cash. If it's some gimmicky digital share, then fake bitcoin you buy. If it's 4 shares of TSLA, regardless of price, you need to provide. At the very least this will require a shortseller to close 4/5 of his short position on 8/28 right before opening new ones on 8/31, right?

No it’s really very simple and it’s only bookkeeping by the broker.

Instant 1: person A has lent out 1 share and person B has borrowed 1 share
Magic happens in the brokers books
Instant 2: person A has lent out 5 share and person B has borrowed 5 shares. (at 1/5 price the per share)

I don’t think anyone ever said person A was not owed their 4 shares-just that they don’t have to be physical shares just like the original one was not a physical share. It was 1 ‘virtual’ share before and 5 after

That doesn’t mean there won’t be some covering by shorts (there will be some) and the price will likely rise as most do when a split is announced.

Remember many of these rules were first set up before instantaneous electronic communication and after hours trading.

Think of the issuance of the new shares as occurring instantaneously at 4pm on Friday and then NO TRADING until Monday at 930am. Old price is GONE on Friday at 4pm. New price starts Monday at 930am. That’s how the market was.

 

[Michael A]

Could one conceivably buy 100 shares on August 21st at 3:59pm, hold them for the weekend, sell them Monday or Tuesday and be eligible for the dividend of 400 shares to be distributed on August 28th? Is there a holding time frame criteria?

The dividend payout is equivalent to 4 shares potentially valued at $300 plus per share.

I realize buying and holding 100 shares x $1500 per share ($150,000) of a volatile stock for a few days could be a little risky but it is not going to go down $1200 (1/5 share price, $300 x 4 shares) in 2 days.

The end payout of 400 shares x $300 per share is $120,000 .....

What am I missing?

 

[ByeByeJohnny]

You don't pay taxes on stock dividend. At least that's my understanding.
Stock Dividends | H&R Block

I don't know how I could have explained it clearer in my post. If you are not a US-taxeable person (or whatever they call it) you most certainly do. 15% is taken out.

Your link makes no reference to anybody not in the US.

I've only owned a few stocks other than Tesla and those only for a few days but around Christmas I got something like $5 paid into my account with a note that it was from a dividend and that 15% had been withheld. So yes it's real.

The more I think about it there is no chance the board would screw their non-US investors like this though. Heck many on the board are non-US investors.

So as some others here I think 'dividend' in this case doesn't mean what most think. If it doesn't it probably also means the shorts are off the hook. For now at least.

 

[bballshinobi]

No it’s really very simple and it’s only bookkeeping by the broker.

Instant 1: person A has lent out 1 share and person B has borrowed 1 share
Magic happens in the brokers books
Instant 2: person A has lent out 5 share and person B has borrowed 5 shares. (at 1/5 price the per share)

I don’t think anyone ever said person A was not owed their 4 shares-just that they don’t have to be physical shares just like the original one was not a physical share. It was 1 ‘virtual’ share before and 5 after

That doesn’t mean there won’t be some covering by shorts (there will be some) and the price will likely rise as most do when a split is announced.

Remember many of these rules were first set up before instantaneous electronic communication and after hours trading.

Think of the issuance of the new shares as occurring instantaneously at 4pm on Friday and then NO TRADING until Monday at 930am. Old price is GONE on Friday at 4pm. New price starts Monday at 930am. That’s how the market was.

What about person C who bought the share from B? B short sold that share. In this instance, both person A and person C are supposed to be credited with the 4 new shares, but only person C is getting it. B will have to make A whole by giving the broker 4 shares who will then credit it to A.

Isn't that how it works?

 

[vikings123]

Could one conceivably buy 100 shares on August 21st at 3:59pm, hold them for the weekend, sell them Monday or Tuesday and be eligible for the dividend of 400 shares to be distributed on August 28th? Is there a holding time frame criteria?

The dividend payout is equivalent to 4 shares potentially valued at $300 plus per share.

I realize buying and holding 100 shares x $1500 per share ($150,000) of a volatile stock for a few days could be a little risky but it is not going to go down $1200 (1/5 share price, $300 x 4 shares) in 2 days.

The end payout of 400 shares x $300 per share is $120,000 .....

What am I missing?

lol I feel like people are just trolling now. There is no dividend. Nobody is giving you free shares. The float increases but market cap and your share of the company remains the same.

 

[Boomer19]

mayhem

@Knightshade et all

a forward stock split is categorized as a dividend event. stop getting hung up on the language. its a split.

the dividends category in the world of corporate actions include stock divs, cash dividends, and forward splits. and no, forward split isn’t taxable in US.
a spin-off can be. a cash div is, even a regular stock div (income)
not a split.
reverse splits are reorganizations.

next,
if you have have 100 shares you’ll now have 500, if you hold until ex date monday 8/31

just like if you’re short 100 you’ll be short 500
the borrow of 100 shares to cover your short becomes a borrow of 500 shares at 1/5 the price

and yes, the stock loan contracts are marked to market.

and no, you don’t owe 500 shares back if short on record date, or pay date. you’d just stay short, but now 5x, until you chose to close out. the loan contract stays open as long as you’re short.
..unless you are on the end of a fail to deliver to nscc in which case you’d be bought in. but tesla is liquid right now, and not hard to borrow.

if you were short a stock when a cash div went ex-date, you’d be debited the cash div amount on pay date.


friday 8/28 is the last day to open or adjust a position to be affected by the split

if you close or adjust your position on friday 8/28 those positions traded will not be affected by the split.

if you have 1 november20 1500 call
for example

it will now be 5 november20 300 call

at least if the oOCC handles it like they’re handling appl

https://infomemo.theocc.com/infomemos?number=47369