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

[Nuclear Fusion]

I must admit I find orbital mechanics and hypersonic flight dynamics easier to understand than financial instruments. So a simplistic question: if the old splitterino* put a damper on naked shorting and precipitated share purchases and SP rise, what happens afterwords? Do those shares get sold to recoup the expense of buying them (SP crashes) and naked shorting recommences?

*© @Lycanthrope

In the Apple example posted, the SP fell over 10 days in all 4 previous splits, but recovered more or less within 60 days

 

[Artful Dodger]

I must admit I find orbital mechanics and hypersonic flight dynamics easier to understand than financial instruments. So a simplistic question: if the old splitterino* put a damper on naked shorting and precipitated share purchases and SP rise, what happens afterwords? Do those shares get sold to recoup the expense of buying them (SP crashes) and naked shorting recommences?

*© @Lycanthrope

After Mike Tyson nails you with a left hook, are you more or less wary of his right uppercut?

With a $410 SP post-split, TSLA could easily do another split within a year, maybe even this year. No, this is a warning shot at abusive short sellers, and also quite a good metaphor for life:



"Don't bet against Elon"

Cheers!

 

[dl003]

I'm in a bit of a pickle. My 401k has a self-direct option that allows me to split up to half of my balance to a TD brokerage account. That's how I can buy a bit more TSLA on the side. The thing is, as TSLA keeps going up, the core fund side (more like the slacking side) becomes increasingly less than 50%, despite new money being added in every 2 weeks. I can't send anymore money to the self-direct side until the SP 500 surges 30% in a single day or TSLA crashes hard. First world problem I guess.

 

[Mo City]

Do we see another landing for consolidation at the $2-2.1k level As there was at 1500 - ( pre split or their equivalent post split prices) before resuming the upward march ?

I think we could see a "landing" post-split, post-S&P, prior to Battery Day assuming the S&P announcement is early September. Any opinion of the level is a wild guess.

If TSLA keeps on rolling, I wonder if the run-up will be too high for Battery Day and Q3 deliveries to sustain.

 

[Oil4AsphaultOnly]

Well, Ameritrade says the opposite:

"If you sell TSLA shares after the record date of Aug. 21 for TSLA but before Aug. 31, you will sell them at the pre-split price. You will not be entitled to the split shares. For example: If on the last business day of trading TSLA, Aug. 28 you sell 100 TSLA shares for a pre-split market price of $1,500 per share you will receive $150,000. You will not receive any split shares.


If you buy TSLA shares after the record dates but before Aug. 31, you will purchase shares at the pre-split price. Following the split, you will receive the additional shares resulting from the stock split. For example: If on Aug. 26 you buy 100 shares (and hold them through the open on Aug. 31) at $1,500 per share, you will pay $150,000. You will receive 400 additional shares after the stock split, and the price will be reduced to the post-split price"

... I guess time will tell.

Ameritrade is a US broker. Not the same situation as UKNorthHampton's broker. Just like the tax situation, we can't just think in US terms and apply it to everyone.

 

[lafrisbee]

would someone please patch together a couple of polls that give the various scenarios that our knowledgeable members have postulated With credit given to each, and we can vote on em?
Like are we going to open on This next monday with the same number of shares and the SP the same, or will it be the same number of shares but at 1/5th the SP, or 5x the number of shares at 1/5th the SP?
And is the SP going to take a dump, or stay right where it is, or continue to climb at a high rate over the next week? and the same poll(s) for the week after....
over the next 2 weeks, Something (or nothing) IS GOING TO HAPPEN!
right?

 

[lafrisbee]

BTW I am officially a 3x er from my 100 shares bought at the end of January. I am also a quarter-teslanairie.

 

[mongo]

Well, Ameritrade says the opposite:

"If you sell TSLA shares after the record date of Aug. 21 for TSLA but before Aug. 31, you will sell them at the pre-split price. You will not be entitled to the split shares. For example: If on the last business day of trading TSLA, Aug. 28 you sell 100 TSLA shares for a pre-split market price of $1,500 per share you will receive $150,000. You will not receive any split shares.


If you buy TSLA shares after the record dates but before Aug. 31, you will purchase shares at the pre-split price. Following the split, you will receive the additional shares resulting from the stock split. For example: If on Aug. 26 you buy 100 shares (and hold them through the open on Aug. 31) at $1,500 per share, you will pay $150,000. You will receive 400 additional shares after the stock split, and the price will be reduced to the post-split price"

... I guess time will tell.

That is not the opposite, they are referring to different time periods
21-28 trade at original price (with due bill)
31st in US accounts: you have 5x the shares at 1/5 the price
31st in UK account, 1x the shares at 1/5 the price (due bills not paid and no longer attached to shares)
Sept 3 in UK account: Additional 4x shares added to account (based on close Aug 28 count, due bill now paid)

Lol, your Broker is clearly lying. The dividend shares are all going to be issued to brokers before the stsart of trading on Aug 31. Tesla employs an Australian company, Computershare Limited (ASX: CPU) to do so.

There is no flexibility, or ambiguity. This is already 1 week's lead time built into the dividend rollout to allow all appropriate accounting, just as every other Stock Dividend that occurs routinely for a myriad of other companies.

Your Broker's words ring of being desperate naked shorters. Look to see what they did the last time a not heavily shorted stock declared a stock dividend. I bet there was no amphorous delay for those.

My advice? Don't sell, let your Broker swing. It's gonna cost them big $$ to buy their way out of the hole they've dug themselves. Just be aware they'l try to wring some of that out of their "beneficiary owners" of TSLA.

Cheers!

Wow, libel much? How about this for a less nefarious option: The UK broker is not a stockholder of record for TSLA and is working through a (probably) US intermediary. That would add an additional step of transferring new shares from the US to the UK firm.
From their FAQ (emphasis mine):
Corporate actions - Frequently asked questions

I hold overseas stocks within my portfolio. Are there any implications for corporate actions on these stocks?

Due to the manner in which overseas stocks are held and delays in obtaining official communications, and communicating instructions to the custodian of the shares in the overseas market, the time in which to respond may be shorter than for corporate actions on UK listed stocks. Also on occasion it can take longer than the stated time period to receive the cash or new share proceeds.

Some corporate actions may result in you holding a stock which is not eligible to be held in the UK settlement system. In such situations it may be difficult or impossible for Hargreaves Lansdown to trade the resulting stock. In such an event, and where possible, you will be given written notice by Hargreaves Lansdown.

In some instances UK residents may not be eligible to take part in corporate actions on overseas stocks. In certain cases restrictions on overseas holders are applied.

Any cash proceeds that are received in a foreign currency will be converted to Sterling at the prevailing exchange rate upon receipt.

As information is occasionally scarce with overseas corporate actions, at certain times it may not be possible to contact you before the event reaches completion.

See also the non-US members who don't get to vote.

 

[Highway2Heel]

Newsflash! The mouse dies with or without the helmet!!

 

[Stretch2727]

I'm in a bit of a pickle. My 401k has a self-direct option that allows me to split up to half of my balance to a TD brokerage account. That's how I can buy a bit more TSLA on the side. The thing is, as TSLA keeps going up, the core fund side (more like the slacking side) becomes increasingly less than 50%, despite new money being added in every 2 weeks. I can't send anymore money to the self-direct side until the SP 500 surges 30% in a single day or TSLA crashes hard. First world problem I guess.

I have the same problem. I hit the 50% limit in early 2018, accumulating on dips. . I probably could have added some more back on the $180 dip in 2019 but did not do it.

Now I am 85% in the brokerage account of my 401K due to TSLA. I don't ever see being able to add more to the brokerage side even with my regular investments. Forced diversification. Just glad I have not been forced to move it back to keep the 50% balance.

 

[Artful Dodger]

I now do see a plausible theory for how the split could be squeezing the naked shorts, although I'm not sure that it is very likely. But I now agree that there is some possibility. I wrote a short blog post outlining my current stance:

Could the TSLA stock split be causing a naked short squeeze?

In his blog, Frank wrote:

"Therefore, if this is true, buying brokers would be demanding that all these equity debts be covered right now before the split, leading to a (naked) short squeeze."​

This is precisely what happened in early Pre-market trading last week, early enough (ie: before 7 a.m.) that we know these were transactions between large brokerages or hedge funds, since only they have trading priviledges at that hour.

Pre-market chart as of Aug 18, 2020 @08:00 hrs:

Also note that Premarket Volume was over 511K shares by 08:00 ET. This is unprecented heavy volume for 8 a.m. and not easily explained other than via a market mechanism such as you describe in your blog (quoted above).

And this was just one example of many which has occured over the past 8 trading sessions. Big entities are trading large volumes of TSLA shares, and its driving the share price up.

Kind regards,
Lodger

 

[UkNorthampton]

That is not the opposite, they are referring to different time periods
21-28 trade at original price (with due bill)
31st in US accounts: you have 5x the shares at 1/5 the price
31st in UK account, 1x the shares at 1/5 the price (due bills not paid and no longer attached to shares)
Sept 3 in UK account: Additional 4x shares added to account (based on close Aug 28 count, due bill now paid)



Wow, libel much? How about this for a less nefarious option: The UK broker is not a stockholder of record for TSLA and is working through a (probably) US intermediary. That would add an additional step of transferring new shares from the US to the UK firm.
From their FAQ (emphasis mine):
Corporate actions - Frequently asked questions


See also the non-US members who don't get to vote.

Also 31st August is a bank holiday in Northern Ireland, England.and Wales but not Scotland. My other provider has no info on the site at all.

 

[Boomer19]

Lol, clearly lying. The dividend shares are all going to be issued to brokers before the stsart of trading on Aug 31. Desperate Naked shorters.

Advice: don't sell. Let them swing.

Cheers!

actually the split allocation may be 8/31, but
9/1 most likely...(i will inquire about when IB expects to receive the allocation from DTCC and report back!)

meaning this is the day for DTCC to receive split share allocation from agent and distribute to its participants.

if you mean when the split is reflected in share price, and some brokers may reflect the split shares 8/31 (in my case IB is my broker) even though they (brokers) don’t have the shares yet from dtcc

diff brokers allocate corp actions proceeds diff ways

ib generally pushes stock allocation on ex or effective date.

... but accrues (to maintain equity neutrality between ex/eff and pay date) cash proceeds until its paid by dtcc, at which point it swaps the accrual for cash
cash pay date:
DR accrual
CR cash

 

[mejojo]

Weekend OT

I love that a family sedan is constantly set up against purpose-built sports cars and muscle cars!

 

[Right_Said_Fred]

... If S&P inclusion happens the volatility should be reduced (again by how much is anyone's guess)...

Why do you think volatility will be reduced? I'm not sure it will. In fact, it may even increase as a much bigger percentage of the float will be locked up in S&P 500 index funds, drastically reducing the number of shares available for daily trading. Lower liquidity tends to exaggerate stock movements (well, that's the theory).

 

[S3XY]

I’ve always wondered about the specific person who’s in charge of the buy/sell for a specific stock at the MM. What does their job look like? Are they basically placed in a cage with two buttons?

Have you not been reading @Lycanthrope's posts?

 

[UnknownSoldier]

Weekend OT

I love how they put "Elon" and "Ferdinand" on the license plates. Absolutely based.

For the people who don't understand, the legendary founder of Porsche is Dr. Ferdinand Porsche, who died way back in 1951.

 

[Artful Dodger]

Wow, libel much?

Got a reference for your U.K. Sep 3rd for the issue of dividend stocks? And that is NOT what the OP wrote from his Broker: they said 'they don't know exactly when' the dividend shares will be issued. This is a HUGE red flag.

Meanwhile TSLA will be trading at ~1/5th it's SP , and every UK stockholder would be denied access to 80% of their rightfully owned TSLA equity from Aug 31 to Sep 2nd.

What happens if a corporate event occurs during those 3 days, or S&P announces after-hrs on Aug 28th, but UK shareholders can only trade 20% of their equity for the next 3 days? Or more, depending on an unspecified what?

Do you think that's a libel lawsuit, or a breech of trust lawsuit? It's going to take more than a snippy blog post to right that wrong. There is huge exposure to liability here.

 

[Bet TSLA]

Got a reference for your U.K. Sep 3rd for the issue of dividend stocks? And that is NOT what the OP wrote from his Broker: they said 'they don't know exactly when' the dividend shares will be issued. This is a HUGH red flag.

Meanwhile TSLA will be trading at ~1/5th it's SP , and every UK stockholder would be denied access to 80% of their rightfully owned TSLA equity from Aug 31 to Sep 2nd.

What happens if a corporate event occurs during those 3 days, or S&P announces on after-hrs on Aug 28th, but UK shareholders can only trade 20% of their equity?

Do you think that's a libel lawsuit, or a breech of trush lawsuit? It's going to take more than a snippy blog post to right that wrong. There is huge exposure to liability here.

Brokers and banks always have lots of fine print in their agreements with their customers. Banks don't have to give you your money in a timely fashion if they don't feel like it. Brokers don't have to honor your attempted trades in a timely fashion either. When everything is calm and normal things generally happen in a reasonable way. But if things are chaotic, or your particular institution is having its own troubles, then they can certainly screw you with no legal consequences. To some degree anyway. Certainly delays of a day or several are within the bounds of the legal and possible.

This is true in the US. I assume it's at least as bad in other places, but I don't know.

 

[Christine69420]

Just cancelled my GTC'ish orders - will be adding new ones post split. Just in case. Probably not necessary but just to be safe. My broker (Nordnet) only allows share prices 20% or so above current. And only 2 months duration. So I have to be vigilant and adjust upwards frequently.

To celebrate the 2k share price we've just had a premium piece of meat and a nice bottle of red. Both cost less than a post split share so not that much over the top.

Apart from that I am a longish long who don't understand much about the perils of being short.
I just wish the expression naked short hadn't entered my mind. The images flashing in my mind are not very decent.

And I just realized I had a 10-bagger back in the 1800's. Another reason to celebrate with a nice bottle.