OMG
HERE, example from Eastman, already posted upthread, that explains exactly how this all goes down. TL;DR it's a stock split (like Tesla says in the title of the announcement) and TSLA will trade at the new price on August 31st. Any of the "weirdness", including shorting, that has been discussed over the last 30 pages will be handled behind the scenes and is really nothing for anyone here to need to worry about.
What is the effective date of the split?
There are several key dates:
The Record Date – September 15, 2011. Stockholders “of record” (that is, whose shares are registered in their names) of common stock at the close of business on the “record date” are entitled to receive one additional share in the stock split for each share held of record on the stock split record date.
The When-Issued Trading Date – September 16, 2011. From the record date to the distribution date, two separate markets will likely exist for Eastman common stock on the New York Stock Exchange (the “NYSE”). The “regular way” market, reported under the Company’s normal “EMN” symbol, will continue to trade at the higher pre-split price. Since sellers in the “regular way” market will receive full value for the shares they sell and are not entitled to the split shares they will receive by virtue of being holders on the record date, they transfer their rights to the split shares to their buyers by means of “due bills”. The NYSE recognizes that stockholders might alternatively want to sell only the “new” split shares while retaining the “old” shares, and this is accomplished by creating a “when-issued” market at the post-split price. When-issued trading is reported under the company’s normal NYSE symbol with a “WI” appended at the end (that is, “EMNWI”). When-issued trading ceases on the stock split distribution date. It is expected that the NYSE will authorize a when-issued market for the new split shares under the “EMNWI” symbol. This will occur only between the September 15 record date and the October 3 distribution date. Trading in the when-issued market will reflect the anticipated split value of Eastman shares. Eastman has no involvement in when-issued trading. Check with your broker if you are interested in when-issued trading.
The Distribution Date – October 3, 2011. This is the date when the new stock split dividend shares are distributed and American Stock Transfer & Trust Company, our stock transfer agent and registrar, mails written notice to stockholders indicating their split-adjusted share amounts and makes book entry adjustments to the accounts of record holders.
The Ex-Stock Split Date – October 4, 2011. The date Eastman common stock will begin trading on the New York Stock Exchange at the new split-adjusted price.
RECORD DATE FOR TESLA: AUG 21
WHEN ISSUED TRADING DATE FOR TESLA: AUG 22
DISTRIBUTION DATE FOR TESLA: AUG 28
EX STOCK SPLIT DATE FOR TESLA: AUG 31
As for shorting:
Before: There are 186M shares outstanding. 12M shares sold short, so 198M shares people think they own.
After: There are 930M shares outstanding, 60M shares sold short, so 990M shares people think they own.
Before: ~$17B of shares sold short.
After: ~$17B of shares sold short.
If a short wants to cover their position, they have to buy 5x as many shares as before but they will be 5x cheaper. No change.
All you need to know is that on August 31st, the share count or contract count will 5x for everyone with any position (long, short, derivative) and the price will 1/5th. Let's move on.
