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

[MikeC]

It's not a dumb question. The question is due to the wording from Tesla: "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."

Hence, the question is regarding what happens to shares traded from Aug 24-28. Thus far, I haven't seen a very good answer to this other than insisting that nothing happens. If that is the case, why is Aug 21 even mentioned? Why not just have Aug 28 be both the "stockholder of record" date as well as the distribution date?

Exactly this, thank you for stating it clearly.

 

[MC3OZ]

Stock splits went off without a hitch back when they actually had to do paperwork. Now it's all done by software.

I think the term dividend is confusing me..
My memory is stock splits were overnight even before a computerized share registry.

For regular dollar dividends a stock could sometimes trade in 2 different basis of quotation, Cum-Dividend and Ex-Dividend.

If Person A owns one Share of Tesla on the 25th and sells it to Person B on the 26th, I assume Person B only ever gets one share and Person A gets 4 additional shares on the 28th. So in terms of the stock dividend Tesla trades Ex-Dividend from the 25th onward.

That is pretty much like regular instant split so as long as everyone understands what they are buying and selling there is no problem.
I certainly would not leave GTC buy orders hanging around.

 

[saniflash]

There are implications for the 'Failed-to-Deliver' (FTD) reports which legally must be filed by Brokers within 13 days, in order to comply with SEC reporting requirements. There will be no dodging this bullet, and its coming right soon.

now that is interesting, I did not consider the naked shorting in my previous post. intriguing but I lack the competence to speculate more about this

 

[Tslynk67]

Damn I am going to need to clone myself so I can not have to take bathroom breaks and can just stare at the stock price all day.

And no I don't take computer into bathroom....that's for smeigal.

Get an Apple Watch, invaluable for when you're on the crapper

 

[Runarbt]

Exactly this, thank you for stating it clearly.

21.august is the most important date.

shares traded 21.aug will get 4 dividen shares, and trade at 1400-1500.

shares traded after 21.august will not get thw 4 shares, and be traded at 1/5th the price of 21.august close.

 

[Tslynk67]

Well, boys and gals, it look's like we can camp out at $370 again! I'll bring a pot of beans. Yee haw!

 

[bballshinobi]

Person A get the 4 shares from the short who borrowed vis share.

Yea exactly. The shortie (B) will have to go out and find (buy) 4 shares to satisfy A.

 

[MC3OZ]

That is forced buying, all due by Aug 28 and yes, the Cops are watching..

Do they have to buy or can they borrow?

Seems to me they can borrow additional shares before the 28th, but the new dividend shares don't yet exist, so they can only borrow from the pool of existing shares.

Yet I assume they must have their shares to pay the dividend on the 28th?

So perhaps there might be a shortage of shares to borrow, and if they can't borrow they have to buy?

 

[Artful Dodger]

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.

This is what you're missing: Tesla WON'T be issuing new shares for the synthetic 'short' shares: Those have to be located and delivered. That is what a "Share Dividend" requires by SEC regulations. Real shares, not just more synthetic shares.

 

[bballshinobi]

Do they have to buy or can they borrow?

Seems to me they can borrow additional shares before the 28th, but the new dividend shares don't yet exist, so they can only borrow from the pool of existing shares.

Yet I assume they must have their shares to pay the dividend on the 28th?

So perhaps there might be a shortage of shares to borrow, and if they can't borrow they have to buy?

I thought you can only borrow to sell (short sell) And it’s done right away? You can’t borrow shares and just park them in your portfolio.

 

[ToTheStars]

Yea exactly. The shortie (B) will have to go out and find (buy) 4 shares to satisfy A.

I don't understand this. A single share will be split into 5 shares right? So actually the short seller sold 5 shares now, instead of 1. Am I missing something?

 

[bballshinobi]

This is what you're missing: Tesla WON'T be issuing new shares for the synthetic 'short' shares: Those have to be located and delivered. That is what a "Share Dividend" requires by SEC regulations. Real shares, not just more synthetic shares.

This is what I believe too. This stock dividend event will remove a lot of synthetic shares from the flow because of the forced buying. Smaller supply x higher demand

 

[MC3OZ]

I thought you can only borrow to sell (short sell) And it’s done right away? You can’t borrow shares and just park them in your portfolio.

That is a good point, depending on the actual legal requirements and rules, they may have to buy.

i agree with Dodger.. Hiro would know the rules.

 

[Mike Smith]

China's CATL aims to make EVs drive further with new tech

WUHAN, China/SHANGHAI (Reuters) - China’s CATL (300750.SZ), a Tesla (TSLA.O) supplier, said on Wednesday it is working on a new technology that will allow battery cells to be integrated with an electric car’s chassis, shedding traditional casings that make battery systems bulky.

 

[bballshinobi]

I don't understand this. A single share will be split into 5 shares right? So actually the short seller sold 5 shares now, instead of 1. Am I missing something?

A share is not split into 5 shares. A share is given a dividend of 4 shares - based on the wording of Tesla’s news release.

And that is the debate... if the 4 shares are given as dividend, then the shorts need to deliver 4 shares to the lender on 8/28.

 

[ToTheStars]

A share is not split into 5 shares. A share is given a dividend of 4 shares - based on the wording of Tesla’s news release.

And that is the debate... if the 4 shares are given as dividend, then the shorts need to deliver 4 shares to the lender on 8/28.

Ok I understand now, thanks for the explanation. If it is really given as a dividend, this is optimally burning the shorts.

 

[Cobbler]

Three Critical Lessons From Tesla’s Epic Rally

My favorite line is the last one
“Never bet against a billionaire rocket scientist who hates short sellers.”

 

[Tes La Ferrari]

You are dreaming. It's just a stock split.

I would agree with you if we were talking about the US & the IRS.

but what I’m referring to is Canadian TFSA accounts that are non-taxable accounta because the money you put in them has already been taxed. Growth inside them is generally capital gains and income tax free in most cases.

the wrinkle is when something is called a “dividend” and how US withholding taxes of 15% could be applied on monies held in a TFSA. ( Canadian Tax Free Savings Account )

admittedly I am not an expert in this area, but it has me wondering

What's the penalty for holding dividend stocks in a TFSA?

“

If your blue chip stocks are U.S. dividend payers, there’s another tax issue to understand: the U.S. imposes a 15% withholding tax on dividends paid to Canadians. However, if you hold your U.S. stocks in an RRSP, this withholding tax does not apply. And if you hold them in a non-registered account, you can recover it by claiming the foreign tax credit on your return. Unfortunately, you can’t avoid the withholding tax in a TFSA.

With that in mind, it might be better to hold U.S. blue chips inside your RRSP rather than your TFSA. But again, you need to consider the big picture. If your registered accounts are not maxed out, it is certainly better to hold U.S. dividend payers in a TFSA than in a non-registered account. Yes, you will lose the withholding tax, but the remaining dividends and all of the capital gains will be tax-free forever.

—Dan Bortolotti, CFP, CIM, associate portfolio manager with PWL Capital in Toronto. “

 

[Tslynk67]

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.

You'll have 5x the number of shares, each worth roughly 20% of the pre-split stock price.

If you've any options then you'll likewise have the number of contracts x5, but with the strike price 20% of the original.

Seems to me that this is going to be very beneficial for existing LEAPS and the IV should go back to normal crazy levels.

Early pre-market in 3 minutes, Germany trading at $1475...

 

[RobStark]

EV Sales: South Korea July 2020

Seems S Korean government to trying to figure out a way to stifle Tesla.

They are looking to reconfigure electric vehicle incentives as high as 18.2M won ($15,613) and launched a safety investigation into Tesla's braking and steering function including Autopilot.