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

[Quesder]

Ok if this is a stock split dividend, does it have any implications tax-wise for tesla shareholders?

credit to Knightshade, and probably should put this in FAQ now:



https://taxmap.irs.gov/taxmap2016/pubs/p550-006.htm

"Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return."

It lists exceptions right below that but none would apply here


Further-

https://taxmap.irs.gov/taxmap2016/pubs/p550-026.htm#en_us_publink100010540

"The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock."

 

[lukex4]

I hold some shares in a Canadian TFSA (similar to US Roth IRA) and we have a 15% withholding tax on dividend for US stocks. Not sure if I'll be impacted as if this is just some Delaware legalese words amounting to a split... But if this is considered as a "real" dividend, I'll lose 15% of the new stocks? I guess I'll need to contact some tax accountant here as this is quite frightening..

 

[Knightshade]

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

Of course it does.

They are required to pay the lender the full dividend ON the dividend payment date.

That's a forced payment on a specific date.

Post split/dividend shorts instantly owe 5x as many shares.

Post SPLIT they would.

Post dividend is not the same thing

Post dividend they still owe 1 share anytime they wish to close their short.

But they owe 4 shares on august 28th specifically

That does not mean they must repay those extra shares instantaneously.

If it's a dividend it means exactly that.

They owe 4 shares (per borrowed share) on August 28th to the lender of the shares.


Split and dividend are treated differently for shorts from each other.

 

[ckessel]

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.

You'll have to use smaller words...

I have a call option for 100 shares at $1500. The holder of those 100 shares gets his dividend of 400 shares. The stock drops to $300 or so.

How do I, as an option holder, have any claim to those 4 shares the actual share holder got as a dividend? How am I not just screwed because my $1500 call option is now on a 100 shares worth $300?

A normal split I get, every share becomes 5. With dividend who owns what and has rights to what sounds convoluted.

 

[UncaNed]

I think that Rob nails it when he says he was putting together an episode on the possible split and was suggesting 69:1 because of the amusement value. He's certainly right that it would have conveyed that Tesla was doing a split while expressing ironic contempt for the whole Wall St. thing.

I rather have smaller, more frequent splits giving us more little SP bosts.

I love that small investors will be able to afford options contracts, not just shares.

 

[Knightshade]

You'll have to use smaller words...

I have a call option for 100 shares at $1500. The holder of those 100 shares gets his dividend of 400 shares. The stock drops to $300 or so.

So far so good.

Y
How do I, as an option holder, have any claim to those 4 shares the actual share holder got as a dividend? How am I not just screwed because my $1500 call option is now on a 100 shares worth $300?

Because your option automatically gets changed to be 5 options for 100 shares at $300 each.

For YOU there's no difference between this and a normal split.


Only would be a difference for shorts, because they have a specific dividend-related obligation as part of borrowing stock.

 

[generalenthu]

Can someone explain why a stock split would cause a stock spike? Thinking that there will be more retail investors coming in because the sp is smaller?(and hence these poor souls think it's a good deal?)

What's funny about it? A stock split changes nothing relevant. There's no fundamental reason for it to affect the stock price. The only reason it is going up after hours is because people think other people might see this as an optimistic sign. It isn't, of course, so any effect will disappear over a short time (a day? a week?). But TSLA is sufficiently volatile that the ups and downs will happen and can be ascribed to any old thing. Just like the drop over the past few days is due to nothing other than random fluctuations, but people are dreaming up all sorts of reasons.

Just wait. Tomorrow the stock price will do something. No matter what it is, the "experts" will say it was because of the split announcement.

I think the point you guys are missing is, this is a signaling mechanism. The company is saying valuation is not going to go down a whole lot from here.

There's value attached to that signal, like insider buying.

 

[woodisgood]

Only would be a difference for shorts, because they have a specific dividend-related obligation as part of borrowing stock.

It’s feeling a lot like that little technicality that seems to matter only for shorts was looked into...

 

[bhtooefr]

Also, updated short interest data from NASDAQ:

A bit of covering to 11,945,253 shares shorted, a significant drop in value at risk, but still $17B. Ihor was 3.5% off (he estimated too much covering).

The next two of these short interest reports will reflect pre-split, after that I think I'll use split-adjusted shares in the graph.

 

[oldTAVguy]

I hold some shares in a Canadian TFSA (similar to US Roth IRA) and we have a 15% withholding tax on dividend for US stocks. Not sure if I'll be impacted as if this is just some Delaware legalese words amounting to a split... But if this is considered as a "real" dividend, I'll lose 15% of the new stocks? I guess I'll need to contact some tax accountant here as this is quite frightening..

OT - Good looking dog.

 

[Knightshade]

It’s feeling a lot like that little technicality that seems to matter only for shorts was looked into...

If it does turn out to be a "real" dividend as discussed you can likely thank this guy:

Hiro Mizuno | Board of Directors | Tesla, Inc.

 

[woodisgood]

If it does turn out to be a "real" dividend as discussed you can likely thank this guy:

Hiro Mizuno | Board of Directors | Tesla, Inc.

Already did a few pages back. But I’ll happily thank him again!

 

[obie_fl]

Can anyone find a reference to a previous split as dividend? I'm dubious to it being any different then a regular split.

 

[MTL_HABS1909]

I hold some shares in a Canadian TFSA (similar to US Roth IRA) and we have a 15% withholding tax on dividend for US stocks. Not sure if I'll be impacted as if this is just some Delaware legalese words amounting to a split... But if this is considered as a "real" dividend, I'll lose 15% of the new stocks? I guess I'll need to contact some tax accountant here as this is quite frightening..

Please let us know if you get any clarification on this. I’m now pretty concerned. If it’s the case, it’ll probably make sense to sell just before the split and buy back after in order to avoid the “dividend”.

 

[ggr]

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.

For all shares, calls, puts, whether you bought the contract or wrote it, it is very simple. Multiply the count by 5, divide the price(s) by 5. For option contracts, both the contract price and the strike price.

 

[GOVA]

Anybody checked tsela nutcases "q" folks on twitter? Long nights ahead of them...

 

[StarFoxisDown!]

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

I could honestly talk myself into inclusion happening tomorrow or Wed Sept 2nd.

The more I think about it I could see a scenario play out like such......if the speculation about the dividend part and shorts is actually true:

Tesla and S&P have been in talks. Tesla is unwilling to dilute at the current stock price so they announce this dividend stock split, forcing a short squeeze that takes the stock up to $2,000 or higher(I personally would want something higher than 2250 for a offering price)...at which time Tesla does a small stock offering on Sept 1st to appease S&P and inclusion is announced after the markets close on Sept 2nd. The stock offering would be the same percentage of shares as pre stock split but because the share float is much larger from the stock split, the total number of shares in the offering "seems" bigger than before. It would be window dressing for sure, but could be compromise in that it "appears" that Tesla is creating a larger number of shares to appease S&P but the dilution percentage stays the same to us.

Something had to have happened or been discussed in the background for Tesla to move up the stock split by nearly a month and a half.

 

[woodisgood]

Anybody checked tsela nutcases "q" folks on twitter? Long nights ahead of them...

Don’t think the implications are hitting them yet. Not really hitting most of the TSLA investment world just yet either.

Again, it all hinges on whether it’s actually a dividend split.

But even if that turns out not to be the case, a regular old split is still bullish AF.

 

[tlo]

@Knightshade Why are you speaking so certain?

A short's obligation is between them and their broker. You are saying the broker will force the short to immediately cover 4 post-split shares on the effective date. This does not make sense from the broker's perspective.

Why would they do that when:
1. Those 4 post split shares are immediately available to borrow again, meaning the short can just cover and then short again immediately.
2. The short is their customer, and doing this will upset their customer.
3. The broker themselves can benefit from the shorts continuing their original position because the broker keeps a portion of the interest.

 

[bhtooefr]

@Knightshade Why are you speaking so certain?

A short's obligation is between them and their broker. You are saying the broker will force the short to immediately cover 4 post-split shares on the effective date. This does not make sense from the broker's perspective.

Why would they do that when:
1. Those 4 post split shares are immediately available to borrow again, meaning the short can just cover and then short again immediately.
2. The short is their customer, and doing this will upset their customer.
3. The broker themselves can benefit from the shorts continuing their original position because the broker keeps a portion of the interest.

But, in that case, the broker would have to provide 4 shares upon the split to the lender, to cover the short's obligation, no? And, they'd have to get them from their own pool of shares, they couldn't borrow them, right?