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

[jerry33]

Then my question #2 is very important. Who records all TSLA shares on the 21st, and how will they be recorded? [/USER]

My understanding is that Tesla is the one making up the lists on the 21st and between the 21st and when the shares are allocated, it's up to the broker to determine ownership. (Might be incorrect, but it's what I've read.)

 

[JohnnyEnglish]

This BofA upgrade is monumental. It’s the biggest flip yet of a TSLA bear analyst. It may be more of a lagging indicator than a leading one, but if I was a short I wouldn’t stick around to find out.

We’ve won a lot of battles ($300, $420, $500, $1500, etc), but the war continues on. This upgrade, though, is like the Battle of Yorktown. As the fog lifts this morning, the sunrise reveals an opposing general waving a white flag.

In order to maintain the general level of camaraderie on this thread it would be good to minimise references to Yorktown

 

[jerry33]

Regarding Stan Morgan's $TSLA upgrade, isn't this a little bit against the conventional wisdom that Wall Street wanted to keep the SP down in order to placate the S&P indexed funds?

I'm rather cynical about the timing of MS notes and find this once puzzling too - it's like they're trying to perpetuate the current rally.

Or are they trying to influence the opposite with the $1360 PT, which just happens to be around where we were riding support over the last week or so, so make an upgrade and increase the PT, so they don't look like total idiots, but keep it low to try and spook a bit.

It's all very curious IMO.

Edit: and now another one with BofA - traditionally very bearish on $TSLA, both an upgrade + >50% hike in PT, what's going on? (thanks @JBRR)

I believe they are just now starting to see the steamroller approaching.

 

[Prunesquallor]

More @ReflexFunds predictions for Battery Day

https://twitter.com/reflexfunds/status/1294243466327842816?s=21

 

[LN1_Casey]

Interesting ad placement in the video lists.

 

[mejojo]

sigh

Long and strong. It might take a little longer, but it’s safer to stay with the pack.

We’ll get there.

Leeeroyyyyyyy Jennnnnkinnnnnnnssssssss

 

[Sancho]

In order to maintain the general level of camaraderie on this thread it would be good to minimise references to Yorktown

Until Covid, Hamilton was selling out in the West End. You Brits are good sports.

 

[jbcarioca]

In order to maintain the general level of camaraderie on this thread it would be good to minimise references to Yorktown

Really? The erstwhile camaraderie between the French and the Americans might be resuscitated a tiny bit by reminding each other of how the former glory of the USA actually was established. At the very least one or two French Tesla sales might be encouraged.

 

[Nocturnal]

Really? The erstwhile camaraderie between the French and the Americans might be resuscitated a tiny bit by reminding each other of how the former glory of the USA actually was established. At the very least one or two French Tesla sales might be encouraged.

Are they still mad about the whole "freedom fry" thing?

It's a follow on to the classic Corvette Stingray, right?

While I'm not a big fan of overtly calling things out in model names (like the iEverything when the internet became popular), it will probably drum up some nostalgia…. it's not the worst name I've heard.

Technically all corvettes are some variation of Sting Ray or Stingray. I think the E-modifier is dumb, but it's the ray part that sounds awkward IMO. They should make a new model with a new name, or just consider it a trim level.

 

[Boomer19]

Pretty sure the second paragraph in that article has a typo, should be sell.
"It’s when the bank/broker-dealers buy stocks, pocket the money and fail to deliver to clients the shares they are supposed to settle through the national stock clearing house."

Up until this point, they could just keep trading non existent shares with each other, like paying off a credit card with a new credit card while the balance keeps rising.
If everyone has to true up by the Aug 28-Aug 31 weekend, then naked shorters are toast since they have no backing and will need to cover.


Yeah, if they are allowed to do that across the Aug 28/31 boundary. Either way, it will be 1 old price share or 5 new price shares. The 1 and 4 senario is more like the special share class dividend (was that Big Lots?).

yeah, i’m not sure what she’s getting at in the second paragraph.

she must mean buy...but cause you’d be ftd to another broker if you sold, not ftd to your client.

even though she had some ‘title’ at DTCC, i know nobody that’s worked in settlement operations for more than 1 year who would explain the process as she does. and the article must be dated, bc the system doesn’t operate that way now.

not to get too nit picky, but if there’s any naked shorting, the brokerage entity would be the last to get away with it. i think there may be something to the madoff exemption that Hock talks about, which to me applies to MMs, HFTs/LiqProviders, and prop desks at Inv Banks

she keeps implying that brokers do the trades. and the process she describes is not accurate. maybe it’s on purpose to make the system sound more salacious.

the brokerage entity generally doesn’t make buy and sell decisions and doesn’t ‘choose’ to fail to deliver or fail to receive. it’s more a function of what it allows it’s customer base to execute on the day. (you’re supposed to locate before letting a customer open short position - and some stocks are on the do not short list). MMs, HFs, HFTs/LiqProviders are more likely to game anything than any brokerage entity. two completely separate things.

the nscc is the middleman who nets the days trading and allocates fails across the street.

and since you’re required to locate before allowing a short...there’s no naked selling by any ‘broker’ unless it’s a huge mistake, at which point they get bought in, and pass it to the short customer.
the brokerage entity is the one that’s unlikely to usurp all the rules in place without risking heavy regulatory fines or losses on erroneous trades that it let its customer get away with.

i’m sure there’s gaming of market, but the brokerage entity is not the culprit. it’s the trading entities

(although i know we pretty much mean the same thing when we say the brokers are crooked, the banks are crooked. the MMs are crooked, etc)

 

[MABMAB]

premarket range 1633-1684. Will we see this expanded upon either way?

 

[joh01652]

Regarding Stan Morgan's $TSLA upgrade, isn't this a little bit against the conventional wisdom that Wall Street wanted to keep the SP down in order to placate the S&P indexed funds?

I'm rather cynical about the timing of MS notes and find this once puzzling too - it's like they're trying to perpetuate the current rally.

Or are they trying to influence the opposite with the $1360 PT, which just happens to be around where we were riding support over the last week or so, so make an upgrade and increase the PT, so they don't look like total idiots, but keep it low to try and spook a bit.

It's all very curious IMO.

Edit: and now another one with BofA - traditionally very bearish on $TSLA, both an upgrade + >50% hike in PT, what's going on? (thanks @JBRR)

Or do the "honest brokers" (if there is such a thing) know of this naked short activity and are calling this out ahead of time.

Very curious indeed.

 

[Unpilot]

Ah, the old Windows vs Mac debate - PC's are just so "messy", haven't you bunch heard of "cable management"?

View attachment 576129

MMM triple hop...bit bitey I assume?

 

[joh01652]

I'm nominating you guys for the Pulitzer.

 

[UncaNed]

I have suspected this for years. FINRA reports on about only half of NASDAQ's total trading activity which occurs on any given trading day (lot's of trading not reported by FINRA). Further, it is mostly those large brokers and hedge funds who DO NOT report through FINRA, making them more likely to be short sellers. There's a lot of secrecy involved.

But it's grammar-school easy to imagine a scheme where two market makers collude to evade the 13-day FTD reporting requirements:

• Broker 'A' sells naked shorts on Day 1
• by Day 12, Broker 'A' has still not located shares
• instead of covering, Broker 'A' buys more shorts from Broker 'B'
• after a while Brokers 'A' and 'B' are routinely swapping naked shorts
  
• the 13 day reporting clock is reset indefinitely, thus the rule is nullified

After a legimate short sale, the share count is supposed to be preserved and trackable. But MMs violate this requirement via their short sellers exemption to do their own proprietary (for profit) trading. Let's use an example to see how this problematic short selling can be broken up:

• before a short sale, let's say there was exactly 1 share total available to borrow
• in a legimate short sale, the share count is supposed to be preserved and trackable
  
• after such a short sale, there are 2 legitimate share owners and a 1 debtor:
  • the original owner (the lender), and
  • the purchaser of the borrowed share (although this fact is hidden from the new owner), and
    
  • 1 borrower (the short seller) who has a contractual arrangement to purchase a share to replace the one they borrowed through their broker
    
  • they have a margin arrangement or capital reserve requirement with their Broker to enforce this commitment
  • Share accounting: 2 shares - 1 promise = 1 share
  • thus the share count before and after a legitimate short sale is 1
• MMs can use their privileges to do problematic naked short selling: (the case not just when a broker fails to locate a share to borrow, but when they personally engage in propriety trading by conducting short selling on their own behalf):
  • there is no borrower, no 3rd party with a separate capital reserve
    
  • share count is violated, since the Broker never attempts to locate a share
  • the role of the law of Supply and Demand is circumvented in setting the share price by skewing the Order Book always to the down side
    
  • Brokers can create infinite synthetic shares over the short term, but always a long enough term to break up a rally (say a few hours or days)
  • all of this is done in secrecy, away from the view of the SEC or reporting requirements

So, how does a 'Stock Dividend' break up such a scam? Although any MM who has a large, unreported backlog of synthetic shares created to support their own proprietary trading (with the express goal of depressing the SP), they CAN NOT use their market maker's exemption to create new shares (they only have the right to borrow shares 'in the blind' with the understanding that they will eventually locate them).

This will not be the case after a 5:1 split. With 12 million shares sold short (as of July 31st), after the split their will be a need to identify 48 million new shares to attach to the existing shorts. This is an accounting problem of enormous magnitude for Broker's that have outstanding FTDs on their books.

It will be like a game of 'hot potato', where other MMs will suddenly be unwilling to swap naked short shares as they scramble to locate shares for their own accounts.

Again, this will not be a problem for any MM that has been conducting their business of short selling properly. It will however be a huge problem for any TSLA market maker who has been engaging in proprietary short selling using their 'Madoff exemption', and without a 3rd party to cover those shorts. It will be their own capital reserves that will determine if they can survive the stock dividend, and the relative size of their short position at risk.

I expect some of the 28-odd market makers in TSLA will not survive this. It's notable that Deutsche Bank has recently announced that they are abandoning their role as MM for TSLA, since they were one of Tesla's most vocal critics and had some of the lowest price targets on the street.

TL;dr no MMs will be harmed by the TSLA stock dividend unless they have been acting improperly. We are about to get a glimpse behind the curtain of secrecy on Wall St.

Cheers!

@avoigt @SpaceCash @Hock1 @Boomer19 @Fact Checking

If the MM's don't survive... what happens to us owners of their options? Do they go bankrupt taking us down with them or something?

 

[jerry33]

i’m sure there’s gaming of market, but the brokerage entity is not the culprit. it’s the trading entities

(although i know we pretty much mean the same thing when we say the brokers are crooked, the banks are crooked. the MMs are crooked, etc)

Well, ThinkOrSwim put up a "Sell TSLA--click here" on the bottom of the screen when the stock was $1500 a few days ago. It was certainly intended to create panic selling. Yesterday it put up a sell AMZN. I wonder how many shares of AMZN I could sell since I don't own any now (or are they allowing retail traders to perform naked transactions?)

 

[Hock1]

I agree, this is just a stock split. But I do think the very mechanics of going through this might be disruptive to those who may be abusing naked shorting due to lack of oversight from the SEC. If they have been putting constant downward pressure on the share price by repeatedly shorting the stock without borrowing real shares (kind of like floating checks in a circle using three or four checking accounts) then there may be something about a split that disrupts their ability to continue the charade through the split process. I don't know enough about the behind the scenes mechanics of naked shorting or managing a split to understand exactly how this might work but the reason it might not be a thing with splits of other stocks is because they don't have the same level of illegal naked shorting happening behind the scenes.

Maybe @Artful Dodger can comment on this. It does seem like constant downward pressure could be applied to the share price with some type of circular shorting scheme that flooded the market with synthetic shares at key market moments. While there is a time limit on how long these synthetic shares can exist, maybe a circular scheme of some sort is used to continuously have large numbers of synthetic shares in circulation. Perhaps the mechanics of the split could temporarily halt their ability to keep these synthetic shares circulating (and this would of course create buying pressure and probably big losses for those running the scheme).

I agree 100%. I believe all those "air-shares" that the manipulators have sold to unwary investors, in order to cap the stock, are coming back to roost. This could be an epic development. Let's see if other heavily-shorted stocks follow suit, and what their SPs do. BTW, the way I read it, AAPL's "split" was indeed a stock dividend. Three shares were delivered for every one share. held by investors. SO, even though they did not use the term "stock dividend", it was. The resultant move in the stock is pretty incredible for $1 trillion++ company. If what we are seeing is true, it is something that I have been hoping and waiting for, for a long time. I just hope everyone gets what he/she deserves.

 

[Boomer19]

From the back of a cereal box (but no, I'm not wearing an onion on my belt):

On the 21st, each brokerage will report the number of real shares held. They will have automatically adjusted for shares lent.
The firm doing the organizing will tally these totals and the sum will not be allowed to be greater than the total number of issued shares. In the event of a discrepancy, they would require the transaction records to prove the share origin. So no extra shares for naked shorting. Only 4x current count will be issued.

Regarding the level of record keeping, this is the same data brokerages have been tracking to calculate cost basis.

End result, everyone has to true up on their real share positions. Normal shorting is handled internally, naked shorting gets nothing and will need to acquire or naked short more shares at the event.

settled positions are held at DTCC

pending settlements, T and T+1 are tracked at NSCC

if trade doesn’t settle on T+2 the broker has a CNS fail (FTR from NSCC)

NSCC can retain the fail tracking and keep it on books until settled (if one broker is FTR, then another is FTD)

or

NSCC can ‘kick out’ the FTR /FTD combo and make it a B2B fail (broker to broker) which is tracked by each broker and by Obligation Warehouse, a DTCC system

further, if a prop trader or individual decides he wants to short, his stock loan desk, or his brokers stock loan desk (in some cases automated) must allow by finding a borrow from an entity who has shares to lend.

if shares readily available to borrow, the shirt can be made.

with the borrow locked in, the position is. ow short, versus a borrow contract at collateral plus int rate

therefore i don’t believe in the naked shorting magical shares from nowhere on record date thing as rampant as everyone thinks.
i’m sure there’s some level of gaming that could occur but we need a better explanation.




everything is accounted for unless it’s outright left off the books at a broker, MM, HFT, Prop desk, etc which is outright fraud

 

[Boomer19]

Well, ThinkOrSwim put up a "Sell TSLA--click here" on the bottom of the screen when the stock was $1500 a few days ago. It was certainly intended to create panic selling. Yesterday it put up a sell AMZN. I wonder how many shares of AMZN I could sell since I don't own any now (or are they allowing retail traders to perform naked transactions?)

that’s strange i wish i could see it in the UI to understand what their logic was

no, it means they have plenty of shares available to loan the seeker if they decide to sell

 

[LN1_Casey]

Well, ThinkOrSwim put up a "Sell TSLA--click here" on the bottom of the screen when the stock was $1500 a few days ago. It was certainly intended to create panic selling. Yesterday it put up a sell AMZN. I wonder how many shares of AMZN I could sell since I don't own any now (or are they allowing retail traders to perform naked transactions?)

Well, it was like the fact I got a notification that Apple was splitting their stocks 4-1 in my TDAmeritrade account. No Tesla notification, *but a "click to exit" notification at the top of my positions for AAPL.

I don't own any AAPL.