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

[Artful Dodger]

So what are you saying? I thought naked short selling is banned. What happened to 1million shares? Are those trade still unsettled ? If so I thought it is max 3 days to settle them. Care to elaborate .. ELI5?
Nevermind, I googled. Seems there are many ways to naked short sell. (I guess at some point they will have to covered it?)

EDIT: I'm going to leave the following "as-is" since many retail investors believe market makers aren't allowed to naked short sell stocks.
___

Learn yourself about the short-selling exemption for market makers (SEC Regulation SHO). I have posted about it here extensively since last fall.

Read the "Key Points About Regulation SHO". There's lots there, but don't miss the short selling exemption for market makers:

"Selling stock short without having located stock for delivery at settlement. This activity would violate Regulation SHO, except for short sales by market makers engaged in bona fide market making."​

Guess who gets to decide what is "bona fide market making"? That's right, the market makers. It's the dogs watching the kennel with Regulation SHO.

You also asked "I guess at some point they will have to covered it?" The answer to the time allowed to cover by market makers is layed out in Regulation SHO itself:

"Rule 203(b)(3) applies to fails to deliver in threshold securities if the participant’s fails to deliver persist for 13 consecutive settlement days. Although as a result of compliance with Rule 204, generally a participant’s fail to deliver positions will not remain for 13 consecutive settlement days, if, for whatever reason, a participant of a registered clearing agency has a fail to deliver position at a registered clearing agency in a threshold security for 13 consecutive settlement days, the requirement to close-out such position under Rule 203(b)(3) remains in effect."​

So again, market makers get special treatment. They have 13 trading days to cover their short sales even before there is a requirement to REPORT the short sale.

Seach this forum for 'failure to deliver' reports, which are released twice a month. That's what members are talking about when people mention the FTD report. It's evidence of naked shorting. But it's also very poor evidence, only reporting just the crumbs of evidence left over after the crime scene cleanup (covering) is already done. Disgraceful situation.

Perhaps you should also read this SEC comment on Regulation SHO where they justify the practice:

"The current NASD short sale rule contains an exemption for qualified market makers. The application of a short sale rule to market makers would dramatically reduce their ability to quickly adjust inventory positions, thereby lessening liquidity throughout the marketplace."
​

The SEC is broken. They are a textbook example of Regulatory Capture. Retail investors are being defrauded by the owners of FINRA, the market makers themselves.

Let's talk again tomorrow (or on the weekend) once you've read more about this an had a few sleeps. I expect your mind will be opened to the current market action.

Regards,
Lodger

 

[Krugerrand]

When will the mkt start looking beyond the valley?

Of course when we have evidence of demand improving
And supply constraints gone.

Anyway we can get a heads up on this data.

Okay, that does it. Every time I read a post that says there’s a demand issue, I’m going to buy a TSLA share. That way I’ll be able to say, when I’m basking on my own island, ‘If I had a TSLA share for every time I heard someone say Tesla has a demand issue, I’d own my own island.’

And yes, I’m serious. I’ve already transferred money into my trading account.

You may now officially quote my new tagline (with appropriate credit): ‘When living in bizarro world, get richer.’

 

[RobStark]

To each their own

True.

And 99% of the market buys cars that have a Cd greater than .25

Most people don't think Prius and Model X are great looking cars.

They primally sell on other virtues.

There are the exceptions, the lovers of efficiency who find beauty in a slippery silhouette.

 

[AcesDealt]

I believe in the earning call Zach mentioned average asp is near $50k, which was surprising because they were trying to push SR+ to achieve higher volume, but LR turns out popular.

Yeah that was mildly surprising. My expectation is N.America > Europe > China for ASP. Maybe ultimately after tax incentive expires 48 / 46 / 44 is what I'm guessing. What do you think? Unfortunately the costs to build will decline slower so unit profitability is going to contract rather substantially. That means they likely need to sell 80k model 3 or so per quarter to maintain Q1 contribution profit levels approximately. I'm thinking this is yet another really tough year. A lot is riding on that FSD progress.

 

[M3Rider]

As in the twitter sitter?

Sorta considered that for a bit, but no. Twitter sitter is to cover ass, but consultant is to make communications more mature and trustworthy. So, no confusion/frustration as a result & potential decisions to postpone purchase until more clarity is there.

I think I am starting to see the point of many, who say that communications need work / polishing.
I think that "closing of all stores and moving sales online" as it came across to almost everybody versus the explanation that "we really meant that you order online anyway, and we only will close the stores with insufficient foot traffic" is two different things and most likely, had the wording been reviewed by somebody else, such a huge gap in meaning would not be missed.
Such communications needs to come from Tesla twitter, not from Elon's.

 

[T@oo]

It sounds like each production line they build from here on out will become more efficient than the last, but I am wondering how long it will take until they reach a similar efficiency to the traditional car manufacturers. As I understand it, they are still well behind them even with the model 3 at this point. Using info from Troy (Teslike), model 3 production in terms of vehicles produced per employee per year is at 64% compared with the original NUMMI factory. Maybe once they produce the cells and packs in the same building as the cars, the efficiency will take a big jump forward.

Edit: Nevermind. Others mentioned it already.

That's because they're much more vertically integrated and make lots of more stuff at NUMMI than just assemble the parts that have been build elsewhere.

 

[Ghostman]

Sorta considered that for a bit, but no. Twitter sitter is to cover ass, but consultant is to make communications more mature and trustworthy. So, no confusion/frustration as a result & potential decisions to postpone purchase until more clarity is there.

I think I am starting to see the point of many, who say that communications need work / polishing.
I think that "closing of all stores and moving sales online" as it came across to almost everybody versus the explanation that "we really meant that you order online anyway, and we only will close the stores with insufficient foot traffic" is two different things and most likely, had the wording been reviewed by somebody else, such a huge gap in meaning would not be missed.
Such communications needs to come from Tesla twitter, not from Elon's.

I recall reading the transcript to the call for the SR where he did say closing of stores that were no longer beneficial. He did not say closing ALL stores. That to me appeared to have been made up as a headline by media and because the call was not public, no one was able to dispute it until the statement was already widely circulated.

 

[Causalien]

It just asserts further how unreasonable (and selfish) Musk is.
What does it (truly) cost him to yield "yeah, I'll have every tweet Tesla related reviewed"?
We're all prisoners of his ego.

But then, I knew that, so I don't really have right to complain.

To be fair we don't know which end is holding up the resolution. It can just as likely for the SEC to hold it out of spite and to benefit whichever short paid then or it could be Elon trying to swing for the fences and forcing the SEC to allow him freedom on twitter. Either case is very likely.

 

[Buckminster]

Just promote a COO and this should all go away.

Multiple reasons for no COO:
1) As DaveT found out, only Elon has the entire puzzle - no risk of losing to competitor
2) JB is not suited to it, Elon doesn't want to put someone above him
3) Too early for Jerome - COO in training?
4) Elon loves it really
5) Flat, more agile structure

 

[M3Rider]

Model Y "looks good" for an "aerodynamic CUV." Which is really an MPV/wagon.

They could've made it look much better. Sacrificing some Cd. And range.

Seriously? Not much to sacrifice @280mi. I agree that range is more important and will take aero caps with it, so I can drive it farther.
The look is fine. I like white. Just don't think of it as a bloated 3, think of it as its own vehicle.
I test drove a bunch of CUVs and was not impressed with Nissan Rogue/RV4, yet they are bestsellers. Utility/price point for Y will suffice. I think the panoramic roof will beat the one of Rogue and the other benefits of Tesla are unmatched. Ultimately, don't care what others think about the looks, the interior and experience is what matters.

 

[K3jSe7Llp7]

Guys let’s be honest or at least open to the idea that the Model Y, generally speaking, if you ask most ppl, does not look good.

EVERY suv is as ugly as a dogs dinner. You should have seen my 65 lotus elan stripped and mod for racing,

 

[Pras]

EDIT: I'm going to leave the following "as-is" since many retail investors believe market makers aren't allowed to naked short sell stocks.
___

Learn yourself about the short-selling exemption for market makers (SEC Regulation SHO). I have posted about it here extensively since last fall.

Read the "Key Points About Regulation SHO". There's lots there, but don't miss the short selling exemption for market makers:

"Selling stock short without having located stock for delivery at settlement. This activity would violate Regulation SHO, except for short sales by market makers engaged in bona fide market making."​

Guess who gets to decide what is "bona fide market making"? That's right, the market makers. It's the dogs watching the kennel with Regulation SHO.

You also asked "I guess at some point they will have to covered it?" The answer to the time allowed to cover by market makers is layed out in Regulation SHO itself:

"Rule 203(b)(3) applies to fails to deliver in threshold securities if the participant’s fails to deliver persist for 13 consecutive settlement days. Although as a result of compliance with Rule 204, generally a participant’s fail to deliver positions will not remain for 13 consecutive settlement days, if, for whatever reason, a participant of a registered clearing agency has a fail to deliver position at a registered clearing agency in a threshold security for 13 consecutive settlement days, the requirement to close-out such position under Rule 203(b)(3) remains in effect."​

So again, market makers get special treatment. They have 13 trading days to cover their short sales even before there is a requirement to REPORT the short sale.

Seach this forum for 'failure to deliver' reports, which are released twice a month. That's what members are talking about when people mention the FTD report. It's evidence of naked shorting. But it's also very poor evidence, only reporting just the crumbs of evidence left over after the crime scene cleanup (covering) is already done. Disgraceful situation.

Perhaps you should also read this SEC comment on Regulation SHO where they justify the practice:

"The current NASD short sale rule contains an exemption for qualified market makers. The application of a short sale rule to market makers would dramatically reduce their ability to quickly adjust inventory positions, thereby lessening liquidity throughout the marketplace."
​

The SEC is broken. They are a textbook example of Regulatory Capture. Retail investors are being defrauded by the owners of FINRA, the market makers themselves.

Let's talk again tomorrow (or on the weekend) once you've read more about this an had a few sleeps. I expect your mind will be opened to the current market action.

Regards,
Lodger

Thanks. Very insightful. Will read more as you suggested. One layman question..


Technically market makers can keep a naked short position open on a rolling basis (settle one position but open another for next 13 days) without having to pay margin money or any fee?

 

[Buckminster]

Trying to remain buoyant following ER. I really thought a positive p/e ratio was 3 months away. June 2020 calls maybe my best bet now. Jan 2021 are significantly more.

Need to change my avatar - it didn't help.

 

[MarcusMaximus]

A note of caution when trusting Elon on anything related to FSD. Full FSD Robotaxi is minimum 3-4 years away. they can probably bridge the gap a little by requiring a licensed not drunk driver to watch AP, but full "go to sleep" FSD is years away.

At a certain point it goes from cute Elon Time to just overly confident/hubristic which hurts the business (see the decision to not raise capital when stock was 350+)

Sure, but meanwhile my car drives me around on the freeway anywhere I want to go without me doing anything.

 

[M3Rider]

I recall reading the transcript to the call for the SR where he did say closing of stores that were no longer beneficial. He did not say closing ALL stores. That to me appeared to have been made up as a headline by media and because the call was not public, no one was able to dispute it until the statement was already widely circulated.

I had to go back and review communications again. Seems the statement from Tesla

Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centers.

was later transformed into "most" stores closing by media. But considering that Tesla said only "small" number will remain, this is not far from accurate interpretation. I forgot that Tesla said this initially, not Elon, but there are also references to Elon repeating it, such as
Tesla is closing all its stores so you can have a $35K Model 3

but he told reporters today "there's no other way" to produce it than by closing all its stores and eliminating jobs.

Either way, seems like Tesla was not super clear and did not object to media's interpretation in a timely manner, so there's a room for improvement here.

 

[Artful Dodger]

Thanks. Very insightful. Will read more as you suggested. One layman question..

Technically market makers can keep a naked short position open on a rolling basis (settle one position but open another for next 13 days) without having to pay margin money or any fee?

Thank-you for your kind reply. I have no data (noone is allowed to escape) but I think that if 2 market makers trade their short positions, they can avoid the FTD reporting requirement indefinately.

We'll get lot's of opinions on that, but again, no data. Market makers short selling is a virtual black hole: information goes in; nothing ever comes out.

We either wait this out until Tesla can do stock buy-backs from profits (about 5 years), or we move TSLA onto a different (non-US) exchange, where the regulators do their jobs and aren't looking for a plum appointment after 'retiring' from public service.

Regards

 

[PANN]

I had a feeling that if Tesla got a new big strategic investor (very deep pocket, long-term commitment, even better if bring synergies...), even with dilutions, the SP will be much higher, much stable than now. I think when Elon said on the call there's some merit to the cap raise idea, he really refers to strategic investor of this sort. Not that Tesla need the money, but it will fight off the $10B shorts. Ark is great but just not big enough.

 

[Artful Dodger]

If batteries are a bottleneck, you get more revenue selling SR+s than any LR pack with prices under ~$49,000.

$39,000/62 = $629
$49,000/78 = $628

MR

 

[Artful Dodger]

If batteries are a bottleneck, you get more revenue selling SR+s than any LR pack with prices under ~$49,000.

$39,000/62 = $629
$49,000/78 = $628

MR had about 62 KWh; SR+ has about 53 KWh, so the raw $/KWh numbers favor of the LR

$39,000/53 = $736

But the SR+ pack is cheaper to make, and now that AP is mandatory, the balance shifts toward making more units total. Finally, with the FAC CO2 pool credits, Telsa is far better off selling max possible units in the EU.

Cheers!

 

[FS_FRA]

Those who buy a 100kWh car to commute 10km each day are likely the types who lease or buy a new car every 3 years. What this means is they take that initial residual hit, and someone else who can make use of that range will end up purchasing it down the line. Since those people would have bought a new luxury vehicle every 3 years ANYHOW, I'd much rather them put another BEV into the downstream used market instead of another dino burner.

Or as is the case with me: I just ordered a Long Range MS instead of the Standard Range because I can’t charge at home and need the practicality of being able to have longer intervals between charging at public chargers.
I certainly didn’t get the Long Range because I have a 50km commute (actually home-office)....