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

[phantasms]

I think we’ll hit 420 again for the 4th time this year.

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[Sofie]

That's not what most of the discussion here is about. It's about the dividend part.

Thank you! Gosh...lol

 

[FrankSG]

So I'm a TSLA investor. Since Elon is active on Twitter I joined too.

But perhaps half the tweets from Elon I'm never notified about. Like this plaid one. I had to click my way around to find it. Just to see it was posted 16 hours ago.

Is there a better twitter client than the official one?

View attachment 575038

I have bookmarked the Twitter search for "Fromelonmusk", which shows all tweets made by Elon.

EDIT: "From: @elonmusk" without the space between : and @.

 

[oldTAVguy]

No.

The share price doesn't matter. Why would it?

If I borrow a share from you when the price is $500, and it goes up to $1000, or down to $200, I still only owe you one share of stock

The price doesn't change that.




Again- the price of the share is irrelevant.

If you borrow shares from someone, and sell those shares, and those shares earn a dividend while you haven't repaid them, you owe the full dividend to the lender.

The dividend in this case is 4 shares of stock for every 1 you borrowed.

No matter the price.




Tesla isn't giving the short anything.

Tesla isn't giving the share lender anything either.

NEITHER holds a registered share of stock at this point.

The guy who BOUGHT the share from the short gets the 4 shares dividend from Tesla.


As a condition of you giving up being the registered owner and lending your share out, you require the borrower (the short) to PAY YOU ANY DIVIDENDS the stock you lent him would have received- even though neither of you own it when that happens.

This could mean share call backs from shorts and margin calls in the morning, maybe some even went out tonight.

 

[FrankSG]

I have to imagine that the timing of this has something to do with S&P inclusion and the fact that the S&P committee has been in touch with Tesla management. Why else move up the date of it when Elon already said it would be a topic for the Annual share holders meeting. I was kind of convinced we weren't getting S&P inclusion until Sept. Not so sure about that now.

What makes you think this split means S&P inclusion will now happen before Sep?

 

[Sofie]

What did we win?

The race to the moon...

 

[FireMedic]

@Papafox Always love to hear your thoughts on everything TSLA. Everybody is saying that because we can trade fractional shares already on most trading platforms that this won’t make any difference.…

I’d love to hear your thoughts on the Chinese investment market. I think that Tesla is borderline more popular in China than it is here; could this be a partial play towards that?

also I read that maybe this could affect the shorts during that one week training. thoughts?

I apologize if this is not in the right forum feel free to move my comments to another forum.

 

[oldTAVguy]

So @ihors3 says 10.53M shares short (on Aug 7th), so at current volumes that would take a couple of days for the shorts to cover, if that was the only trading happening. In reality they have a few weeks in which to cover, so it will probably only add about 1M shares/day to the trading. But then there's the snowball effect of pushing the price higher, so they need to cover as soon as they can, so...

Edit: another way to look at it. Tesla will issue 4*186M new shares. But the broker's books will show an extra 4*10.53M shares owned either by the owner of record or the lender. 10.53/186 ~= 5.6% of the new shares that are unaccounted for, and that will come straight from the shorts, one way or another. So, because TSLA is so heavily shorted, there actually is a value increase of about 5% per share. I think.

Yes the synthetic shares have value in the market that must be met . And the difference between the number of "real" shares and "Synthetic" share must be filled by the shorts.

 

[Stretch2727]

If it's a dividend.

If it's a normal split, then yeah, you just now owe 5 whenever instead of 1 whenever.

THAT is why split vs dividend matters for shorts.

Your forgetting they have cash from the original short sale which post dividend is "5 shares". So they can pay the dividend with the cash from the original sale of stock. Most likely the "dividend" will be that they owe the lending stock holder 5 shares post dividend so the impact is a wash.

Not and expert but I fail to see how this will effect the shorts other than the overall effect of the stock price rise.

 

[Off Shore]

Just to avoid confusion I would think S&P inclusion will either happen before August 21 or after Sept 1.

If the math skills of the index fund people match those we're seeing here, I certainly hope so.

 

[ckessel]

With all the talk of it being a dividend split and the impact on shorts, it seems like it'd be the same problem for someone holding a call option. I have a call option on 100 shares. The holder of the actual shares gets the 4 shares from the split, but I don't have any claim to those 4 shares, only the original share(?). Similar stories for sold puts.

Which seems horrible for option holders, well, half of them anyway. I can't believe that's the case, so I'm still unsure how the dividend is any different than a non-dividend split.

 

[Krugerrand]

Hello tax experts out there. Does a stock split in the form of dividends reset the waiting period for gains to be considered long-term?

No. Someone posted that the new shares take on the aspects of the old. So the 4 new shares take on the term of the original share.

 

[Knightshade]

This is an interesting discussion, but I believe, when August 28 comes, every short, instead of being 1 share short, will be 5 shares short at, theoretically, 1/5 the price.

Not if it's a dividend, no. That's the key difference from a regular split.

Consider: 1) if there were a cash dividend owed by the shorts, they could simply pay what is called an -in-lieu-of dividend to the original owner of the stock;

Yes. For the cash amount of the dividend.

In this case, the dividend is 4 shares of stock

Thus, on August 28th specifically, they must pay the lender of the 1 share, 4 shares of stock.

They can't pay them with anything else. And they can't wait later to pay them either.


In short (pardon the pun)-

They don't magically "owe" them 5 shares anytime instead of 1 share anytime.

They owe them 1 share anytime just as they did before, and they own them a 4 share dividend ON the date the dividend is paid- August 28th.


All of this assumes 2 things:

it IS a dividend and not a regular split.

And-

They are still short T-2 days from the registered date (Aug 21).

So there's gonna be shorts rushing to cover in the next ~5 trading days to avoid all this.

And then more of them rushing to come up with 4 post-split shares per borrowed share by August 28th.

 

[Off Shore]

The confusion ensuing on this board from a simple stock split, is very telling. Most participants here do not have a clue. Let me put it simply: there is no way for anyone to game the system here. With the effective date declared, there is no way for anybody to get screwed. Even if you're really stupid. If you sell before the effective date you will sell the amount of shares you NOW own. If you sell on, or after, the effective date, you will be selling 5x shares, at 1/5 the price. If you are an options jockey, divide or multiply everything by 5, with those dates in mind.

We need a "Futile" button.

 

[SpaceCash]

 

[Knightshade]

With all the talk of it being a dividend split and the impact on shorts, it seems like it'd be the same problem for someone holding a call option.

Nope. Doesn't change those at all.

The only reason it matters to shorts is the original lender of the share would otherwise be screwed out of his dividend since he "lent" his share out and is no longer the holder of record on the recording date.

No such thing exists with options because the "holder of record" is the guy who owns the actual stock and nobody is lending or borrowing anything.

 

[mongo]

Because that's how dividends work.

It's explained in exactly the paragraph you quoted in your post.



That's not correct.

The guy who is now the owner of record (which is neither the lender of the share, nor the short of the share-it's the guy who BOUGHT the shorted shares from the shorter) gets the 4 extra shares from Tesla as a dividend.

The short OWES the original lender 4 extra shares that he WOULD HAVE gotten from Tesla as a dividend- and he owes them on the same date the dividend would've been paid.

You don't get to just owe those 4 extra shares "whenever"

You can still repay the 1 original share whenever. But the 4 dividend shares you own ON dividend day.


If it's a dividend.

If it's a normal split, then yeah, you just now owe 5 whenever instead of 1 whenever.

THAT is why split vs dividend matters for shorts.

That doesn't explain forced repayment of shares at the time of dividend grant. Shares are borrowable.

Thus, on August 28th specifically, they must pay the lender of the 1 share, 4 shares of stock.

Post split/dividend shorts instantly owe 5x as many shares. That does not mean they must repay those extra shares instantaneously. The original owners share count goes up 5x and the number lended goes up 5x. The short has now borrowed 5x, but the value of each is 1/5 and the total margin amount is unchanged.

Owe immediately != repay immediately.

 

[JRP3]

The question is will I be rich or rich?

 

[bhtooefr]

OK, so, just to clear something up - it looks like, as the ex date is after the date of record, Tesla shares will continue trading as if the dividend hasn't happened, until the 31st, just like with Apple's split?

That is one hell of a short burn, and I don't see a way for the shorts to get out of it if that's the case. (Unless, of course, as discussed just above me, it just counts as the short borrowing 4 more shares from the lender for every share.)

And being a special dividend, options may be adjusted to compensate (and others have posted that they should be).

That is... impressive.

 

[Knightshade]

Your forgetting they have cash from the original short sale which post dividend is "5 shares". So they can pay the dividend with the cash from the original sale of stock.

No, they absolutely can not.

The dividend isn't cash. In any amount. It's 4 shares of stock.

They don't get to pick how they provide the dividend to the lender- it must be exactly what a holder of record would've gotten if they'd not lent the share.

Likewise they can't give a lender a share of stock worth what a CASH dividend would've been worth that day going the other direction.

Not and expert but I fail to see how this will effect the shorts other than the overall effect of the stock price rise.

The difference is they owe them 4 shares on August 28th specifically.

Not "anytime they decide to close their short"

That's a huge, huge difference.