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

[SebastianR]

Can someone please help me understand and find the hole in my logic on short-selling (not naked short-selling).

Before the split:
(A) buys 1 share in the market. Lends it to (B). (B) sells the share to (C) for cash (and hopes to re-buy later at a lower price).
(A) has 1 "synthetic" share; (C) has a real share.

After the split
(C) gets 4 additional shares.
(A) still has only 1 "synthetic" share but wants 4 more "synthetic" shares
(B) "makes profit" - yay - the one share owed is only 20% of the value - however, (B) also owes 4 more shares to (A) - to honour the split - so sadly "no profit". Normally that's not a big deal: shares are only 20% and you can buy the in the open market, right? - i.e. this is in theory a "neutral" situation. Unless you can't buy shares in the open market because all of a sudden there are so many shorted shares and the float is too little.

What we have right now might exactly NOT be naked short-selling but large scale short-selling and the effects of a significant reduction in float: the synthetic shares did not multiply, and of course people expect a settlement in shares not in USD. So if there are no naked shorts, this creates massive "ownership pressure" of shares which might contribute to the "buying pressure" we see right now.

Thoughts?

 

[mad474]

FYI I just called Deutsche Bank.
They said split was yesterday, payment will be tomorrow on Sept 2nd.
So if you don't have your shares yet, it should be tomorrow.

It's important to not that dividend shares sent from the Transfer Agent, Computershare Trust Company, DO NOT have a 2-Day Settlement provision (New SEC Settlement Mandate—T+2 effective March 2017)

However, TSLA shares bought on the open Market on Mon, Aug 29 will only be settled by Wed, Sep 02 and therefore unavailable for transfer until then.

This is strong evidence that this Broker (Deutsche Bank) does not yet have sufficient shares available to make all it's Beneficiary Owners whole.

I just wonder why I am not in the least surprised about this. Maybe it is because, as former IT head responsible for interbank contract management and interbank transactions, I had to deal with similar events? But it has been so long ago and my memories are fading.

And jawohl, one ages very fast at such events

 

[Artful Dodger]

The shares were supposed to have been transferred last week. Yesterday was simply the first day of trading at post-split prices.

Yup, mine arrived in full on Saturday morning, August 29th (as advertised by Tesla in their Stock dividend press release).

No Dividend shares from RBC (noted TSLA bears), not yet per @MTL_HABS1909 ).

Some people seem content to believe one large national bank's brokerage business receives special treatment from the Transfer Agent vs. another large national bank also in Canada.

Guess that's easier to swallow than facing the obvious. But no, the Transfer Agent has no way of knowing how many "beneficial owner" shares are on any particular Broker's internal accounts. The Transfer Agent only has a single listing for the Brokerage as a whole, listing them as the "Shareholder of Record". So the Transfer Agent wouldn't even know who is short or how much.

Or, what will happen if the SP plunges before "beneficial owners" receive their dividend shares? Crickets... We've already seen reports of "Call us if you want to sell" policies. Sure, 'our CSR's will be able to return your call within 48 hrs'... (no way the 'over-the-phone' order system can handle anywhere near the volume of the automated systems which you 'temporarily' can not use.

This is a Policy designed by intent to drastically limit 'sell' volume, and to deprive rightful Owners of their propery. (coughLawsuit)

#CognitiveDissonanceIsReal

 

[StealthP3D]

Who cares if they're lying? So long as nobody gets cheated, it doesn't much matter what they say.

If they were really dishonest scum, all your money would be gone. Or at least somebody's would. But it's all just fine.

I'm afraid you fail to grasp the theory that has been presented. Nobody is trying to take anyone's shares but you can't deliver shares you don't have. That would explain the unusual delay. The inability to deliver the shares is evidence of a large number of floated shares, with no underlying shares to back them up. They would need to purchased on the open market which would add the kind of delays we are seeing and cause the price to rise. It is effectively increasing the number of buyers without any increase in the number of sellers. I've never seen such widespread inability to account for the shares. Did you know every share/block of shares has a unique identity? This is not rocket science. They had all last week to accomplish this.

The market makers run on very thin margins but the ability to float a large number of shares at will would give them the ability to manipulate the share price to their advantage when needed. The theory is not that they are trying to steal anyone's shares, just manipulate the natural functioning of the markets to their profit advantage.

 

[StealthP3D]

Can someone please help me understand and find the hole in my logic on short-selling (not naked short-selling).

Before the split:
(A) buys 1 share in the market. Lends it to (B). (B) sells the share to (C) for cash (and hopes to re-buy later at a lower price).
(A) has 1 "synthetic" share; (C) has a real share.

After the split
(C) gets 4 additional shares.
(A) still has only 1 "synthetic" share but wants 4 more "synthetic" shares
(B) "makes profit" - yay - the one share owed is only 20% of the value - however, (B) also owes 4 more shares to (A) - to honour the split - so sadly "no profit". Normally that's not a big deal: shares are only 20% and you can buy the in the open market, right? - i.e. this is in theory a "neutral" situation. Unless you can't buy shares in the open market because all of a sudden there are so many shorted shares and the float is too little.

What we have right now might exactly NOT be naked short-selling but large scale short-selling and the effects of a significant reduction in float: the synthetic shares did not multiply, and of course people expect a settlement in shares not in USD. So if there are no naked shorts, this creates massive "ownership pressure" of shares which might contribute to the "buying pressure" we see right now.

Thoughts?

We went over this over the last couple of weeks. The borrowed shares are simply a debt. They effectively split when the borrowed shares split. Yes, it's screwy and increases the effective number of shares whether or not there is a split. That's why I recommend resisting the temptation to loan out your shares (by being on margin or by accepting "rent" payments for your shares).

This is a different situation than naked short shares which have no borrowed shares with which to support a split. Market makers are allowed to sell short (with a time limit) but those shares cannot legally be split. Real shares have to be delivered which will put upward pressure on the share price. Essentially, all the naked short shares need to be cleaned out of the system during a stock split.

 

[FrankSG]

Can someone please help me understand and find the hole in my logic on short-selling (not naked short-selling).

Before the split:
(A) buys 1 share in the market. Lends it to (B). (B) sells the share to (C) for cash (and hopes to re-buy later at a lower price).
(A) has 1 "synthetic" share; (C) has a real share.

After the split
(C) gets 4 additional shares.
(A) still has only 1 "synthetic" share but wants 4 more "synthetic" shares
(B) "makes profit" - yay - the one share owed is only 20% of the value - however, (B) also owes 4 more shares to (A) - to honour the split - so sadly "no profit". Normally that's not a big deal: shares are only 20% and you can buy the in the open market, right? - i.e. this is in theory a "neutral" situation. Unless you can't buy shares in the open market because all of a sudden there are so many shorted shares and the float is too little.

What we have right now might exactly NOT be naked short-selling but large scale short-selling and the effects of a significant reduction in float: the synthetic shares did not multiply, and of course people expect a settlement in shares not in USD. So if there are no naked shorts, this creates massive "ownership pressure" of shares which might contribute to the "buying pressure" we see right now.

Thoughts?

The relationship between (A) and (B) is simply a debt. If before the split that debt was a debt of 1 share at say $2,500. Now after the split, this debt simply gets adjusted to 5 shares at $500.

If (A) was happy to lend out 1 share worth $2,500, in all likelihood he will also be happy to lend out 5 shares worth $2,500.

 

[UkNorthampton]

I'm afraid you fail to grasp the theory that has been presented. Nobody is trying to take anyone's shares but you can't deliver shares you don't have. That would explain the unusual delay. The inability to deliver the shares is evidence of a large number of floated shares, with no underlying shares to back them up. They would need to purchased on the open market which would add the kind of delays we are seeing and cause the price to rise. I've never seen such widespread inability to account for the shares. Did you know every share/block of shares has a unique identity? This is not rocket science. They had all last week to accomplish this.

The market makers run on very thin margins but the ability to float a large number of shares at will would give them the ability to manipulate the share price to their advantage when needed. The theory is not that they are trying to steal anyone's shares, just manipulate the natural functioning of the markets to their profit advantage.

I'm wondering if this is the first stock split since someone outsourced their IT. Cobol/Cics/DB2 might need a tweak from an aged coder. Hard to believe Apple and Tesla are the first splitters. Might be the biggest (therefore more money needed to tape up / fudge the problem). That points to something else. I'm not able to judge this, but it does seem very odd. But I'm not expecting my UK providers to have sorted this for a few days (as per their warnings). As a long term hold (intention) person, I'm not too fussed, am relying on stock markets being
voting short term
and
weighing long term.

 

[StealthP3D]

The relationship between (A) and (B) is simply a debt. If before the split that debt was a debt of 1 share at say $2,500. Now after the split, this debt simply gets adjusted to 5 shares at $500.

The debt is one of shares - the value of the shares doesn't enter into the situation. There are rights that go with the pre-split shares. The post-split shares do not have those rights attached.

If (A) was happy to lend out 1 share worth $2,500, in all likelihood he will also be happy to lend out 5 shares worth $2,500.

The lender of the shares doesn't have a choice. When they lend the shares they are agreeing to transfer certain rights of those shares to the borrower. The broker handles it and the lender has already agreed to also lend any split shares that may arise.

 

[FrankSG]

Frank, I've lost a lot of respect for you for pushing the theory that the brokerage houses have suddenly become so grossly incompetent they can't get the shares to their rightful owners even when given 10 days to do so and with no evidence to back up your theory (other than taking them at their word). Do you really think they would tell you the truth if their behavior was fraudulent? It's a pretty wild claim that they somehow managed to properly deliver the shares for so for many decades (and in only 7 days in almost all cases) and now they can't seem to get-er-done. Maybe COVID-19 has addled their brains, LOL!

There is a good reason for the 7 days between the split and the deadline for the delivery of shares.

Hint: It's because history has shown that's plenty of time for the required book-keeping. This is what brokers do for a living. It's their primary job. Stock splits are not an unusual occurrence. They are normal.

I'm not pushing for any theory. I'm just pointing out what I believe to be insufficiently backed up theories presented almost as if they're facts.

 

[Causalien]

is there a point where Tesla gets to large that just between elon + institutional shareholds there is not enough additional float for the indexes to buy what they would need to buy when s and p inclusion happens?

I am a strong believer in tesla but this is starting to feel like something very crazy is going on.

It's starting to make sense why my share transfer wrecked havok at TD. Even though it should not be big enough to affect the market, but it is big enough that if all of our conspiracy turns out to be true the amount will indeed cause a lockup

 

[StealthP3D]

I'm wondering if this is the first stock split since someone outsourced their IT. Cobol/Cics/DB2 might need a tweak from an aged coder. Hard to believe Apple and Tesla are the first splitters. Might be the biggest (therefore more money needed to tape up / fudge the problem). That points to something else. I'm not able to judge this, but it does seem very odd. But I'm not expecting my UK providers to have sorted this for a few days (as per their warnings). As a long term hold (intention) person, I'm not too fussed, am relying on stock markets being
voting short term
and
weighing long term.

I'm sure there is a lot of manual work created by a stock split (that isn't coded for). But I've never seen this extra work cause a widespread failure to deliver the shares in time to trade them at post-split prices. That's just inexcusable and anyone who tries to normalize this behavior is too innocent for their own good.

 

[StealthP3D]

I'm not pushing for any theory. I'm just pointing out what I believe to be insufficiently backed up theories presented almost as if they're facts.

I've never presented the naked short theory as anything but a theory. But the evidence certainly points strongly in that direction while you are willing to assume that brokerages have suddenly become less competent than they have been over the last several decades. Both are theories and neither can be proven or disproven by arguing on the Internet.

But let's not pretend that your theory is more supported by the facts when you haven't supported your theory in any way except to say the other theory is crazy.

 

[Artful Dodger]

I'm wondering if this is the first stock split since someone outsourced their IT.

Yes, that's it. It's been outsourced to Romania with Martin Tripp & Associates. /S

 

[vikings123]

Great post. I don’t own any AAPL shares anymore but has any AAPL investor reported delays with their additional shares showing up in their account?

Maybe not because it was a traditional split vs the dividend based split that TSLA just went through.

Yes,
I didn’t receive my split stock from AAPL and TSLA on my National Bank trading online account

Anyone know if the same issues are occuring with the AAPL split? Sure it's a straight "split" and not a "stock dividend", but just wondering?

And there were "stock dividends" in the past, did these suffer too??

See above where I asked the same question and one poster responded.

 

[UkNorthampton]

I'm sure there is a lot of manual work created by a stock split (that isn't coded for). But I've never seen this extra work cause a widespread failure to deliver the shares in time to trade them at post-split prices. That's just inexcusable and anyone who tries to normalize this behavior is too innocent for their own good.

Next things.. for Tesla Welcomes Hiromichi Mizuno as New Independent Director to its Board and others at Tesla (not sure who should get the kudos - Elon, Zach, Hiro or others)

1. 1 cent dividend
2. 2 for 1 stock split announcement with an accelerated timescale. The price is too high after all.
3. vote by shareholders on issuing more shares for future splits!

 

[heltok]

Giga Shanghai already making Model Y: https://twitter.com/ray4tesla/status/1299580253535264768
Giga Berlin going up faster than Shanghai:

Giga Austin going up faster than Berlin, I mean they started at the same time the contract was written and progress seems to be accelerating very fast...
Giga India coming soon

FSD around the corner. Battery day around the corner. S&P who even cares at this point.

What a time to follow this stock! Action every day, so much things happening. It’s starting to consume too much of my mindspace. But then again I am making more money per day than I ever have in my life so I guess for now it is worth it! Is it gonna be this intense the rest of the year? Even next year? Next decade? Gonna need to pace myselft!

 

[Runarbt]

I've never presented the naked short theory as anything but a theory. But the evidence certainly points strongly in that direction while you are willing to assume that brokerages have suddenly become less competent than they have been over the last several decades. Both are theories and neither can be proven or disproven by arguing on the Internet.

But let's not pretend that your theory is more supported by the facts when you haven't supported your theory in any way except to say the other theory is crazy.

well, we do have the saying:

"Never ascribe to malice that which is adequately explained by pure incompetence."


But this do smell kinda funky..

 

[jeewee3000]

Next things.. for Tesla Welcomes Hiromichi Mizuno as New Independent Director to its Board and others at Tesla (not sure who should get the kudos - Elon, Zach, Hiro or others)

1. 1 cent dividend
2. 2 for 1 stock split announcement with an accelerated timescale. The price is too high after all.
3. vote by shareholders on issuing more shares for future splits!

No cash dividends please. Taxed way too highly over the pond. Another 5:1 split would help the really poor investors though

 

[StealthP3D]

Next things.. for Tesla Welcomes Hiromichi Mizuno as New Independent Director to its Board and others at Tesla (not sure who should get the kudos - Elon, Zach, Hiro or others)

1. 1 cent dividend
2. 2 for 1 stock split announcement with an accelerated timescale. The price is too high after all.
3. vote by shareholders on issuing more shares for future splits!

Kudo's to Hiro for accepting a Board position! I'm thrilled to have such a wise, principled person of his stature representing shareholders. I suspect Hiro was behind this stock split. I have no idea who first floated the idea of recruiting Hiro or if he contacted Tesla on his own accord but I'm really pleased to have him.

 

[StealthP3D]

well, we do have the saying:

"Never ascribe to malice that which is adequately explained by pure incompetence."


But this do smell kinda funky..

Sayings are only as useful as they happen to apply to a particular situation. Much better to follow the evidence than rely on pithy sayings. I can see nothing that adequately explains why the brokers would suddenly become less competent at carrying out a simple stock split and plenty that points to a lack of shares with which to deliver.

Make no mistake, Tesla issued 4 shares for every registered share under each brokers purview and the brokers had 9 days to deliver and yet some of them couldn't. It does appear there is a shortage of shares at some brokerages that sent everything into turmoil. I suspect the shares will all be delivered by tomorrow or Wednesday and then the buying pressure will finally subside.