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

[Prunesquallor]

I hope the $5B is put towards a massive expansion of the FSD team
Robotaxis generate far more revenue than building 5 million cars per year

…Nine pregnant women thing. I doubt throwing money at that will help. More Gigas or Black Swan insurance.

 

[SunCatcher]

Nope, that's exactly how I felt as well. *sugar*. My heart has sank a little....I'll miss his vids and ramblings...

Jack Rickard was a prime example of how truly unique each human being can be. To say that he was one of a kind, is an understatement of vast proportions. I too will miss his videos. He spoke with an articulation that always captivated me. He will never be replaced. Such is the nature and beauty of life. RIP Jack.

 

[MC3OZ]

I agree with Dave ... if/when the $5B is exhausted, I can see Tesla repeating for another $5B.

Tesla picks the timing and can sell as much or as little as they want at anytime....if this is done slowly, the short term impact on the market is minimal ... we might not ever see another $5B simply because the original $5B is never exhausted.

GF Austin or more cell production possibly in new countries are my priority...

Additional capex invested wisely in new factories is always a good idea.

For FSD once they get Dojo up and running it is "operation vacation", Dojo will do a lot of the work, while the team sip cocktails by the pool.

 

[lafrisbee]

"Tesla stock is too high."
-- Elon Musk
Elon Hires a Shortz-hater Hiro (MM).

Tesla gets 5 billion in stock to control the Manipulation of the Stock Price by MM's.

Ants know 4-D chess exists. We just can't lift the pieces.

 

[redan]

Tesla and Apple Stock Are Flying. Here’s One Reason the Market Isn’t Talking About.

According to a [URL='https://www.thebeartrapsreport.com/blog/2020/09/01/stupid-rich-skew/']Wall Street newsletter from the Bear Traps Report published Tuesday, Wall Street is too short gamma, and that is messing up brokers’ hedging strategies. It could also be partly fueling the steep rise in some stocks, including Tesla and Apple.[/URL]

 

[FrankSG]

That 'pre-split' estimate of 26 M shares needed by Index Funds was based on the old TSLA Market Cap.

Since S&P 500 components are weighted by their Mkt Cap, you can muliply those 26M shares by 1.75x now to get the current likely weight if TSLA were included at this share price. That's about 46M shares.

This Cap Raise of $5B doesn't begin to touch that, and what's more, the way its structured it allows the SP to continue to go up daily, as Tesla agrees to a minimum sale price.

Didn't @Fact Checking call this the 'Infinity Squeeze'?

HODLing.

I think it's just as likely this is a quickie Cap raise to help the MMs out of the bind they're in over the next 2 days while they scramble to buy the shares they are obligated to provide to their "beneficial Owners".

I think there'll be more to come once S&P time comes around: this slightly unusual Cap raise sets the precedent for that and allows the S&P Committee to finally make their announcement.

All while Tesla benefits handily. This cash could not go to a better cause than Tesla's business plan thru 2025.

Let's ROLL!

Cheers!

This is factually incorrect. This is not how S&P weighting works.

You can either read my blog post on the topic, or watch Rob Maurer's video. Both explain that the S&P uses "float-adjusted market cap weighting", and the number of shares that index funds need does not change as market cap fluctuates.

By your logic, if TSLA was the size of AAPL, index funds would have to buy more shares than all currently outstanding shares.

Here is the relevant calculation from Rob's video:

 

[srius]

Credit Suisse gives their thoughts on the S&P add from a note issued this afternoon. Thought it was interesting to hear it from an institutional perspective.

"S&P add may be announced by the end of this week: With rebalance scheduled for the third Friday of Sep (Sep 18), an announcement would occur two weeks prior (Sep 4). Of course, there is no guarantee Tesla will be included in the next add given challenges in adding a company of Tesla’s size – there is no precedent for a ~$450bn+ company to be added to the Index; we believe many investors assume an add this month.""

That will be after the market close on Friday before a long weekend. Would it be announced 10 trading days prior rather than two calendar weeks?

 

[Prunesquallor]

Tesla and Apple Stock Are Flying. Here’s One Reason the Market Isn’t Talking About.

According to a Wall Street newsletter from the Bear Traps Report published Tuesday, Wall Street is too short gamma, and that is messing up brokers’ hedging strategies. It could also be partly fueling the steep rise in some stocks, including Tesla and Apple.

Jeez. This is @Krugerrand 's textbook for basket weaving. I gave up halfway through.

 

[Dutchie]

What is so special about being in S&P500 other than prestige? I get it about ETF’s need to buy in when companies are elected to go into S&P500 and what it means for initial demand of the stock; but what is the added value once you are in?

 

[FrankSG]

But this is where the wheel falls off, because (A) only has one share. He never got the other 4 shares, because he wasn't a shareholder of record. So he can't be the one who lends them to (B). Pre-split, there were ~10.6M such (A) shares that didn't get the other dividend shares. But the person A needs to be made whole somehow. (B) has to buy or borrow from someone else.

Now this morning we discover that Tesla is issuing another $5B or so worth of shares, coincidentally that's about 10M shares. I wonder why? At least now the market has enough shares available that all the shorts can borrow again.

By the way, all the shorts, naked or otherwise, face the same problem. It's just bigger for the naked shorts, they have to find 5 shares, not just 4.

There was a lot of confusion over this in the days following the split announcement, but shorts are not impacted by the split as your describe.

You're saying that (A) cannot physically lend shares to (B), but (B) doesn't physically need to borrow anymore shares. (C) gets the 4 dividend shares, so he's all good. Even if (A) could lend shares to (B), what is he going to do with them? Sell them on the open market to a new long? That would increase his short position.

Pre-split, the positions of (A), (B), and (C) are as follows:

• (C) owns a real TSLA share.
• (B) owes (A) 1 TSLA share @ $2,500.
• (A) is owed 1 TSLA share @ $2,500 by (B).

As mentioned, (C) receives the 4 share dividend during the split.

The relationship between (A) and (B) is a simple debt. There's a few ways this could be resolved:

1. (A) asks (B) to pay back his share before the split so he will get the 4 dividend shares. But (A) will no longer receive interest on his lent out share.
2. (A) asks (B) to pay him 4 shares post-split. In this scenario (A) will now receive 80% less interest, because he is lending out only 1 share @ $500 instead of 1 share @ $2,500.
3. (A) and (B) simply agree to change the debt between them from 1 share @ $2,500 to 5 shares @ $500. (A) continues to receive the same amount of interest on the now 5 shares lent out to (B).

Although I haven't heard anyone confirm this, in all likelihood #3 is the standard way to deal with short positions during a split like this. Even if some of the (A)'s asked their (B)'s to do things in way #1 or #2, it's likely that those (B)'s just borrowed shares elsewhere from an (A) willing to go with #3. There are currently plenty TSLA shares available for borrowing.

 

[larmor]

https://twitter.com/icannot_enough/status/1300927814112292870?s=21
View attachment 583376 View attachment 583377

Apple was a company that made PCs- I know we sold them even the hideous first gen Macs...

 

[Sofie]

Why You Should Not Day Trade | White Coat Investor

Who has been a successful day trader here?
Who has been a successful long holder here?

Eh why complicate things? Buy and hold for long term is too easy. Plus, that day trading business, sure seems awful stressful!

 

[Remster32]

That will be after the market close on Friday before a long weekend. Would it be announced 10 trading days prior rather than two calendar weeks?

The note says by Friday the 4th. I don't think S&P has historically posted announcements on Fridays.

Edit: Looks like I'm wrong. Thanks MP3Mike for the link.

 

[FrankSG]

The market makers are the naked short sellers. This activity, done excessively, gives them the ability to move the share price when desired and provides them with more profit opportunities. When Tesla announced the 5:1 stock split the price jumped and the naked short positions were caught with their pants down. This is multiple entities (market makers) since greed is rampant.

Could you explain this bolded part in more detail? This is a very big assumption that I have not seen enough evidence for to call it more than a theory.

I don't claim to know how every single thing works behind the scenes at Wall Street, but I've done a fair amount of research, and @Boomer19 shared some very helpful insights with me in a PM. Although I think it is possible that the split forced some, a lot, or all of the naked shorts to cover, in my opinion it's currently just a theory backed up by some anecdotal evidence.

@Boomer19 , do you mind if I share the PM you sent me explaining in detail how FTDs are handled by the NSCC's CNS system?

 

[juanmedina]

Another OT. Tesla making child safety car seats at the 16:15 mark:

 

[MP3Mike]

The note says by Friday the 4th. I don't think S&P has historically posted announcements on Fridays.

You should watch Rob's video, he does all of the analysis:

So yep, Friday is on the table, in fact it is the day they most often added a company to the S&P 500.

 

[FrankSG]

What is so special about being in S&P500 other than prestige? I get it about ETF’s need to buy in when companies are elected to go into S&P500 and what it means for initial demand of the stock; but what is the added value once you are in?

Stock price is ultimately determined by simple supply & demand.

S&P 500 inclusion will reduce the TSLA float by almost 20%, effectively reducing supply by 20%. Such a large reduction in supply can have a large positive effect on stock price.

Other than that, you are right that nothing much changes.

 

[MP3Mike]

Stock price is ultimately determined by simple supply & demand.

S&P 500 inclusion will reduce the TSLA float by almost 20%, effectively reducing supply by 20%. Such a large reduction in supply can have a large positive effect on stock price.

Other than that, you are right that nothing much changes.

Some funds lend their shares, so some of that 20% will still be available to trade.

Also, a lot of people have their 401k, and other retirement account, contributions directed to a S&P500 fund, so it will provide some level of continuous buying pressure. (I think I saw that people are adding to S&P500 faster than there are redemptions.)

 

[The Accountant]

Stock price is ultimately determined by simple supply & demand.

S&P 500 inclusion will reduce the TSLA float by almost 20%, effectively reducing supply by 20%. Such a large reduction in supply can have a large positive effect on stock price.

Other than that, you are right that nothing much changes.

@Dutchie
To add to @FrankSG information:

In the US, there are 80 million active participants in 401k retirment plans. These plans have annual inflows of $500 Billion.
Many participants select the S&P500 fund as one of there investment funds. When Telsa enters the S&P500, there will be new annual demand for the shares coming from 401k investments.

 

[Creekstalker]

What is so special about being in S&P500 other than prestige? I get it about ETF’s need to buy in when companies are elected to go into S&P500 and what it means for initial demand of the stock; but what is the added value once you are in?

S&P 500 index funds are (more or less) HODLers. It effectively reduces the amount of shares available which protects downside while not hurting upside.