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

[chrsk]

Yes I agree, this stock dividend is engineered to target the MMs that are abusing their naked shorting priviledges to further their own proprietary trading.

Everyone else will be either okay, or unaffected. It's the manipulators that are headed to the mill to have their grist ground down.

As I have said previously, there are effectively no retail shorts left with open positions on TSLA. It's all deep pocketed MMs now, the likes of Jonass and MorganStanley and their ilk.

Their money won't help them now, nor will their priviledged postions as MMs operating under the cover of Regulation SHO (the Market Maker's exemption from the SEC prohibition against naked short selling). They will have to cough up actual shares, and any failure to do so will be recorded in the legally required 13-day FTD reports.

TL;dr Hiro is my new hero.

P.S. Start here on FTDs (then GIYF)

SEC.gov | Fails-to-Deliver Data

Cant get my head around it. If you do a naked short you sell a stock and get the current sp for it. If you then have a stock split your still short the same amount, only difference is the number of shares.

What am I missing here?

Sell one share you do not own, you now owe one share. After the spilt you owe five shares.

1450 - (290*5) => 0

 

[jerry33]

Stocks splits have tremendous psychological value. Look how many people here are giddy on the news. Many people, including myself, view it as a bullish sign by management that the stock is going to continue to climb.

I'd suggest that it's a bit more than psychological because as the value of the shares change, the amount you gain (or lose) changes by the number of shares you have. So if you have five times the number of shares, there is also five times the impact. Now I'm sure someone will point out that if the shares are at the price before the split the amount of change should be more--but I don't know if that actually holds in practice. I'm pretty sure that people value a $100 SP change as $100 regardless of the base value of the stock.

 

[samppa]

so Why now? with S&P 500 inclusion looming somewhere (hopefully not too far) in the distance, why the split now? What implications will it have on S&P500 inclusion, or will it have any?

 

[Artful Dodger]

so Why now? with S&P 500 inclusion looming somewhere (hopefully not too far) in the distance, why the split now? What implications will it have on S&P500 inclusion, or will it have any?

"...to make stock ownership more accessible to employees and investors."

 

[jerry33]

Again, it all hinges on whether it’s actually a dividend split.

I think it needs to be explained how a dividend in Delaware can be different than a dividend in any other state. If states can choose what various stock-related terms mean, then there's no uniformity to the system and no one would buy shares of any company.

 

[PaulusdB]

What a relief to live in The Netherlands where you can trade all you want all year long, but where you only get taxed 1,2% of your balance every year (the average of the balance on the 1st of January and the 31st of December). No matter how much you made (or lost) during the year! Low and simple, that’s what capital gains taxes should be like.

You'd better check again, M.

De facto The Netherlands taxes natural persons on their capital, not their capital gains.

It used to be the average of those two dates; now it is the balance on January 1st. (Changed in 2012, btw)

And the 1,2% has been changed to four brackets:
(0,00%) upto € 30.846 per natural person
(0,54%) € 30.846/€ 61.692 to € 72.798
(1,26%) € 72.798,- to € 1.005.573
(1,58%) over € 1.005.573

Whether or not this is a low taxation or even a fair system, is up for discussion. But simplicity has gone out the window, for sure.

 

[Artful Dodger]

What am I missing here?

With the Stock Dividend, Tesla will only issue new shares for registered owners of shares, which will be ennumerated as of Aug 21, 2020. These are not synthetic 'short' shares, but real shares which will have to be provided by the holder of the short contract as part of their legal agreement and obligation entered into when they decided to sell the share short.

It's not about the money; shortzes will have to provide the actual share itself on Aug 28th. The only way to do that will be to buy an actual registered share, not by borrowing more shares. They can not create shares by shorting for the purpose of a share dividend. Only real shares allowed.

This restores the law of supply and demand to a (badly-distorted) market, where it has been sorely lacking for many years. Only the Company, Tesla, has the sole sovereign right to issue new shares. No MM can usurp that right (at least not without reporting it as an FTD after 13 days)

 

[jerry33]

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:
View attachment 575221
Funny thing is, it’s actually true.

It certainly worked that way in Canada when they switched from gallons to litres.

 

[Boomer19]

Pffff, woke up and found 24 pages to plough through. And at first glance they provide more confusion than clarity. I propose a 1-for-5 reverse post split.

yep, lots of mixed info

bottom line, everything you need to know about the split is:

• the dividends category in the world of corporate actions include stock divs, cash dividends, and forward splits.
• forward split isn’t taxable in US (dilution)
• a cash div is, even a regular stock div (income)
• but not a forward split. that’s the difference.

• 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
• stock loan contracts between brokers are marked to market.
• 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 if tesla became hard to borrow, you’d be “bought in”. but unlikely.

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

1. friday 8/28 is the last day to open or adjust a position to be affected by the split
2. if you close or adjust your position on friday 8/28 those positions traded will not be affected by the split.
3. ex date is what matters for trading....you trade friday it’s pre-split, at start of trading monday it’s post-split

• if you have 1 november20 1500 call for example
• it will now be 5 november20 300 call

originally I posted incorrectly on this options adjustment point on @Papafox page, but it has been deleted.

• here is the correct way, and example of the
• OCC memo how they’re handling appl https://infomemo.theocc.com/infomemos?number=47369

the tesla memo will be out shortly

forward split usually bullish, hence the after hours positivity

• but it doesn’t actually “force” shorts to “cover” so i dunno where that is coming from.

 

[H Mak]

Apologies if I've missed it but no one seems to have covered this. I have a Model 3 on order, due for delivery in September. Will I receive 5 small cars or one normal size car in 5 pieces?

 

[redan]

Apologies if I've missed it but no one seems to have covered this. I have a Model 3 on order, due for delivery in September. Will I receive 5 small cars or one normal size car in 5 pieces?

Think of the market implications of the small car in places like Europe and India! Game over.

 

[Tslynk67]

On the week 21-28, if we talk about $NKLA within this thread, do we have to give five shares or one?

 

[UkNorthampton]

Off-topic to a large degree, but this is a big part why I and presumably many others support the electrification mission and Tesla (AND WON'T SELL UNLESSI HAVE TO)- I'll just link to the article which is about "Indigenous people living at the headwaters of the Amazon have called on European banks to stop financing oil development in the region, as it poses a threat to them and damages a fragile ecosystem, after a new report found $10bn in previously undisclosed funding for oil in the region."

The intriguing thing for me is the picture of oil lorries being ferried across a river - looks really unsafe to me.

European banks urged to stop funding oil trade in Amazon


In other news.... BP mulls radical reduction of office space in move to flexible working

They're getting rid of many employees and working from home for many more. They might be anticipating further reduction in employees or financial distress.

"BP mulls radical reduction of office space in move to flexible working
‘Reinvention’ would represent most dramatic downsizing of property portfolio in BP’s 111-year history"

Again, less debt and profits of oil and gas likely in my opinion.

 

[Prunesquallor]

I said 10 to make people think I was smarter than I really am. So thanks for pointing out reality to everyone.

Bad news for your island. It looks like this now.

 

[Unpilot]

It seems pretty clear to me that @Krugerrand will have to split her island up into 5 plot's.

It's only fair.

 

[Artful Dodger]

forward split usually bullish, hence the after hours positivity

but it doesn’t actually “force” shorts to “cover” so i dunno where that is coming from.

It comes from (among others) these two posts:

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

and

Re-reading the IR announcement, I'm pretty convinced this is not a normal stock split.

The biggest clue is the fact that there's a date of record (August 21, 2020). Regular stock splits don't typically have record dates, do they?

Anyone holding the stock on August 21 is entitled to 4 shares for each one they hold. What happens if someone buys a share on August 22? They've missed the record date, but the stock will start trading on a split basis on August 31.

Let's do some simple math:

• RIGHT NOW there are 186.36 M shares of TSLA, plus about 11.95M shares sold short (as of Jul 31, 2020) for a total of 198.31 M shares in the Market Place
• AFTER the 5:1 split (eff. Aug 31) there will be:
  • 11.95*5 M + 11.95 M = 943.75 shares in the Market (assume 0 covering)
• HOWEVER, for supply and demand to balance without changing the SP (except for the 5:1 split), there woulld need to be this many shares to make all shareholders whole:
  • 198.31*5 M = 991.55 M shares on the Market
• that's a SHORTFALL of 47.8 M additional shares (post-split basis) that have to be either purchased by shorts to maintain their current short position, or those same shorts must close enough of their positions to balance supply and demand (ie: reduce the number of shares in the market
• BOTH of which actions by shorts drive up the price. Sure, no one is forced to cover, but they will have to pay one way or the other. And the funds MUST come from the short sellers. That's why they have margin requirements.
  
• The DOLLAR AMOUNT (assuming no SP change) would be about:
  • ( $1,450 / 5 ) * 47.8 M = $13.9 Billion extracted from the shorts

Yeah, that's about 5.1% of TSLA's Mrkt Cap. So that's what we're on about.

More likely, shortzes (even the large MMs) can't come up with $14B cash by Aug 28th, so the SP will go up to balance supply and demand for shares, with the shares coming from sales by existing longs. Which will make it harder for shortzes to cover the longer they wait. Classic bum's rush ensues.

#GONNABEBIG

 

[vikings123]

With the Stock Dividend, Tesla will only issue new shares for registered owners of shares, which will be ennumerated as of Aug 21, 2020. These are not synthetic 'short' shares, but real shares which will have to be provided by the holder of the short contract as part of their legal agreement and obligation entered into when they decided to sell the share short.

It's not about the money; shortzes will have to provide the actual share itself on Aug 28th. The only way to do that will be to buy an actual registered share, not by borrowing more shares. They can not create shares by shorting for the purpose of a share dividend. Only real shares allowed.

This restores the law of supply and demand to a (badly-distorted) market, where it has been sorely lacking for many years. Only the Company, Tesla, has the sole sovereign right to issue new shares. No MM can usurp that right (at least not without reporting it as an FTD after 13 days)

Once the stock split is effective on August 31st they can continue to naked short at the split adjusted price correct?

 

[Tslynk67]

It comes from (among others) these two posts:



and



Let's do some simple math:

• RIGHT NOW there are 186.36 M shares of TSLA, plus about 11.95M shares sold short (as of Jul 31, 2020) for a total of 198.31 M shares in the Market Place
• AFTER the 5:1 split (eff. Aug 31) there will be:
  • 11.95*5 M + 11.95 M = 943.75 shares in the Market (assume 0 covering)
• HOWEVER, for supply and demand to balance without changing the SP (except fot the 5:1 split), there woulld need to be this many to make all shareholders whole:
  • 198.31*5 M = 991.55 M shares on the Market
• that's a SHORTFALL of 47.8 M additional shares (post-split basis) that have to be either purchased by shorts to maintain their current short position, or those same shorts must close enough of their positions to balance supply and demand (ie: reduce the number of shares in the market
• BOTH of which actions by shorts drive up the price. Sure, no one is forced to cover, but they will have to pay one way or the other.
• The AMOUNT (assuming no SP change) would be about:
  • ( $1,450 / 5 ) * 47.8 M = $13.9 Billion

Yeah, so that's about 5.1% of TSLA's Mrkt Cap. That's what we're on about.

Likely, shortzes (even large MMs) can't come up with $14B by Aug 28th, so the SP will go up to balance supply and demand for shares. Which will make it harder to cover later. Bum's rush ensues.

#BIG

Tried to DM you, @Artful Dodger, but it ain't allowed...

Anyway, typo in the above:

AFTER the 5:1 split (eff. Aug 31) there will be:

• 11.95*5 M + 11.95 M = 943.75 shares in the Market (assume 0 covering)

 

[WarpedOne]

Once the stock split is effective on August 31st they can continue to naked short at the split adjusted price correct?

Yes.
Assuming they survive to tell the story and the pain was not enough to change their behavior.

Q: What if anything would be different if the dividend was say 9 new shares?

 

[SatsumaKing]

Will the stock split neutralise the impact of SP500 inclusion. For example, if the requirement for those tracking the SP500 is specified as having to own certain % of shares, then these firms can essentially invest less, but still meet share number ownership criteria. Since there is effectively less money being invested in the stock, the increase due to SP500 might not be as high as previously thought.

If this was the case, I can only assume that this was done at the request of the SP500 rather than Tesla. Perhaps so as to deliberately avoid SP500 inclusion sending the stock to absurd levels.