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

[engle]

Where is my original post? It is okay to quote from an SEC filing it's not copyrighted, duh!

Teslas sets a minimum sales price from time to time:

"(c) The Company shall not authorize the issuance and sale of, and a Designated Agent shall not sell as sales agent, any Share at a price lower than the minimum price therefor designated from time to time by the Company and notified to a Designated Agent in writing. In addition, the Company or a Designated Agent may upon notice to the other party hereto by telephone (confirmed promptly by email or facsimile), suspend an offering of the Shares with respect to which that Designated Agent is acting as sales agent; provided, however, that such suspension or termination shall not affect or impair the parties’ respective obligations with respect to the Shares sold hereunder prior to the giving of such notice."

"Stock Dividend Adjustments

On August 10, 2020, the board of directors of Tesla declared a five-for-one forward split of its Common Stock in the form of a stock dividend to stockholders of record on August 21, 2020 (the “Stock Dividend”). The Stock Dividend was distributed after close of trading on August 28, 2020, and trading began on a stock split-adjusted basis on August 31, 2020. As of August 28, 2020, there were approximately 933,540,135 shares of Common Stock outstanding."

That's post-split.

Previously:

"Teska selling $5B Stock!!

Inline XBRL Viewer

I read between the lines as this is intended to accommodate TSLA's addition to the S&P 500!

From TSLA's SEC Form 8-K:

"Item 1.01
Entry into a Material Definitive Agreement.

Equity Distribution Agreement

On September 1, 2020, Tesla, Inc. (“Tesla”) entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Goldman Sachs & Co. LLC, BofA Securities, Inc., Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, SG Americas Securities, LLC, Wells Fargo Securities, LLC and BNP Paribas Securities Corp., as sales agents (each, a “Sales Agent” and collectively, the “Sales Agents”), to sell shares of common stock, par value $0.001 per share, of Tesla (the “Common Stock”) having aggregate sales proceeds of up to $5.0 billion (the “Shares”), from time to time, through an “at-the-market” offering program (the “Offering”).

Upon delivery of a placement notice and subject to the terms and conditions of the Equity Distribution Agreement, the Sales Agents will use reasonable efforts consistent with their normal trading and sales practices, applicable state and federal laws, rules and regulations, and the rules of the Nasdaq Global Select Market to sell the Shares from time to time based upon Tesla’s instructions for the sales, including any price, time or size limits specified by Tesla. Under the Equity Distribution Agreement, the Sales Agents may sell the Shares by any method permitted by law, including in ordinary brokers’ transactions, in negotiated transactions, in block trades, and in transactions that are deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”). The Sales Agents’ obligations to sell the Shares under the Equity Distribution Agreement are subject to satisfaction of certain conditions, including customary closing conditions.

The Equity Distribution Agreement provides that the Sales Agents will be entitled to compensation for their services in the form of a commission of up to 0.50% of the aggregate gross proceeds from each sale of the Shares, and Tesla has agreed to reimburse the Sales Agents for certain specified expenses. Tesla has also agreed to provide the Sales Agents with customary indemnification and contribution rights. Tesla is not obligated to sell any Shares under the Equity Distribution Agreement and may at any time suspend solicitation and offers under the Equity Distribution Agreement. The Equity Distribution Agreement may be terminated by Tesla at any time by giving written notice to the Sales Agents for any reason or by each Sales Agent at any time, with respect to such Sales Agent only, by giving written notice to Tesla for any reason or immediately under certain circumstances, including but not limited to the occurrence of a material adverse change in the company. The Offering of the Shares pursuant to the Equity Distribution Agreement will terminate upon the termination of the Equity Distribution Agreement by Tesla or the Sales Agents.""

I think the excluded shares (e.g. options and RSU's) should be added back for all practical purposes since they are all in the money. When you do that:

Total Possible Shares = 931,596,365 + 145,634,950 + 21,377,935 = 1,098,609,250.

EX-99.1:

"
Adjusted Capitalization and Dilution Data of Tesla, Inc.

Capitalization

As of June 30, 2020, our additional paid-in capital was $15,894 million and we had 931,596,365 shares of common stock outstanding after giving effect to our five-for-one forward stock split in the form of a stock dividend on August 28, 2020 (the “Stock Dividend”). This excludes:

• 145,634,950 shares of common stock issuable upon the exercise of options outstanding at June 30, 2020 at a weighted average exercise price of $56.45 per share;

• 21,377,935 shares of common stock issuable upon the vesting of restricted stock units outstanding at June 30, 2020;

• 90,385,220 shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of 55,572,135 shares of common stock reserved for issuance under our 2019 Equity Incentive Plan and 34,813,085 shares of common stock reserved for issuance under our 2019 Employee Stock Purchase Plan;

• the shares of common stock reserved for issuance upon conversion of our 1.25% Convertible Senior Notes due in 2021, our 2.375% Convertible Senior Notes due in 2022, and our 2.00% Convertible Senior Notes due in 2024, and the warrant transactions entered into in connection with the issuance of these notes; and

• the shares of common stock reserved for issuance upon conversion of (i) the Zero-Coupon Convertible Senior Notes due in 2020 issued by SolarCity Corporation (“SolarCity”) and convertible into shares of our common stock as a result of our acquisition of SolarCity, and (ii) the 5.50% Convertible Senior Notes due in 2022 issued by Maxwell Technologies, Inc. (“Maxwell”) and convertible into shares of our common stock as a result of our acquisition of Maxwell.

Dilution

As of June 30, 2020, we had a net tangible book value of approximately $9.35 billion or $10.03 per share of common stock, based upon 931,596,365 shares of common stock outstanding on such date (all reflected after giving effect to our Stock Dividend on August 28, 2020). Net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, non-controlling interests and mezzanine equity and divided by the total number of shares of common stock outstanding."

 

[MTL_HABS1909]

All the new retail investors piling into TSLA will amplify these “fake” dips caused by the MMs. These new investors aren’t used to the volatility and will probably panic sell at the first sign of a drop.

 

[ggr]

Indeed, and the ~10M odd shares in this Cap Raise feels more than vaguely like the number of phantom short shares that need to be located and purchased in the next 2 days.

pre-split there were about 10M shares short. But this cap raise is 10M post-split shares. It's only about 1/4 what the shorts need.

Edit: Forgot to say that I (too) think that the capital raise is to smooth entry into the S&P 500, not to help out the short sellers. It isn't enough for either purpose, really.

 

[jpsgoneev]

Depending upon where you live. $9K / year for two with no particular medical problems. And it covers about 1/3 of the actual costs.

Oof. Yes, you’re right. Very many variables. Depends on your circumstances. To clarify I was speaking for my own situation and circumstance. Like buying a car, in a loose analogy. I intentionally went from top of line (employer paid) to mid-model, as we are low users. $1k, early 50s, 2 deps. Suitable deductibles and ann maximums, and cover other costs.

Edit: I orig thought you’d said $9k/mo. Had to reread.

 

[redan]

Where is my original post? It is okay to quote from an SEC filing it's not copyrighted, duh!

It probably got deleted because we've already been talking about and dissecting this for hours!

 

[kbM3]

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!

Incorrect. Because SP500 Index funds currently represent roughly 17% of the total market, it is required that they purchase 17% of the float for any new company. So that’s basically 26M shares (130M post-split), whether Tesla has a market cap of $1B or $1T. They have to buy 17% of the float.

‘The only difference a larger market cap makes, is that they need to sell a higher percentage of the other 499 stocks to purchase Tesla.

 

[MTL_HABS1909]

With the way this new capital raise is structured, isn’t it in the best interest of those underwriting it to drive the share price down as low as possible since they can then sell at whatever price they want? Seems to me if they can get shares at say $450-475 and then turn around and sell them for $500+ they have an incentive to spend a bit now to drive the price down? Correct me if I’m wrong in my assumption.

 

[UncaNed]

Correct, here they can feed the market with more shares when they want, at the current market price.

Personally I think it's genius.

Meaning when Tesla wants?

...Or perhaps not at all if Tesla so chooses??

 

[Artful Dodger]

pre-split there were about 10M shares short. But this cap raise is 10M post-split shares. It's only about 1/4 what the shorts need.

Indeed. However, what I'm talking about is the unknown number of naked short shares, which are not accounted for in the bi-weekly Short Interest report from NASDAQ, because they are internal between the "shareholder of record" (the broker) and the "beneficial owner" (their customer on that trading platform).

All speculation of course, we'll never know, nor will they ever admit anything about their business practices.

Cheers!

 

[MABMAB]

VWAP for today is higher than all day yesterday
VWAP is at an all time high.

 

[Tslynk67]

Why is it genius? (thanks!)

Because if they'd done a conventional offering it would be priced at Monday close $498 per share (likely), $5b in the bag for ~10m shares.

Instead they can now sell those shares at a higher price on the market, either generating the same money for less dilution or generating more money for the number of shares created (I'm not sure which applies).

So more money for less, basically.

 

[chrsk]

Updated max pain: 440$

I guess the MM would like it to stay bellow 500, if it does not change.

 

[PV4EV]

All speculation of course, we'll never know, nor will they ever admit anything about their business practices.

Here's something worrying .. I just called my UK broker to ask why my pre-split share count has not been updated, whereas the post-split share price has. I’ve just been told that they have chaos going on due to the number of frustrated APPL and TSLA clients not yet receiving the new allocations.

BUT .. I cannot sell anything I don’t yet have, even if the SP tanks .. possibly causing pent up sell action if many others are in the same boat and none of us can sell until further notice.

Which leaves me exposed to the will of the market, and unable to act.

The broker does not allow shorting, so I couldn’t even sell short what I ought to have been allocated.

I joked that maybe this farce has been caused by MM’s / manipulators selling naked shorts and being unable to produce the actual shares .. and he laughed saying ‘you maybe onto something, but I can’t possibly express a firm opinion’


.

 

[Chocochip]

So TSLA is offering an extra ~9M shares, accounting for about 1% dilution. The volume in the first half hour of trading today is over 26M, with the price down about 4% (not including the over 7% up in pre-market). Let's agree this is not caused by the secondary offering.
Also, can we resume regular service?

 

[Favguy]

Here's something worrying .. I just called my UK broker to ask why my pre-split share count has not been updated, whereas the post-split share price has. I’ve just been told that they have chaos going on due to the number of frustrated APPL and TSLA clients not yet receiving the new allocations.

BUT .. I cannot sell anything I don’t yet have, even if the SP tanks .. possibly causing pent up sell action if many others are in the same boat and none of us can sell until further notice.

Which leaves me exposed to the will of the market, and unable to act.

The broker does not allow shorting, so I couldn’t even sell short what I ought to have been allocated.

I joked that maybe this farce has been caused by MM’s / manipulators selling naked shorts and being unable to produce the actual shares .. and he laughed saying ‘you maybe onto something, but I can’t possibly express a firm opinion’


.

I'm in exactly the same boat with 4/5th of my shares missing and no one will even clarify when they might arrive! Not that I want to sell anyway, but it's a poor show. Your brokers response was also telling!

 

[TheTalkingMule]

Edit: Forgot to say that I (too) think that the capital raise is to smooth entry into the S&P 500, not to help out the short sellers. It isn't enough for either purpose, really.

Both the split(which easily could have been doubled) and the raise(which easily could have been tripled) feel like compromise levels that are part of a negotiated S&P inclusion formula. Now that both have been announced, I expect inclusion to very soon be announced for the mid-Sep rebalance. Perhaps the Friday before a big holiday weekend to give the big boys max chance of manipulation?

 

[T@oo]

With the way this new capital raise is structured, isn’t it in the best interest of those underwriting it to drive the share price down as low as possible since they can then sell at whatever price they want? Seems to me if they can get shares at say $450-475 and then turn around and sell them for $500+ they have an incentive to spend a bit now to drive the price down? Correct me if I’m wrong in my assumption.

They sell the shares in behalf of Tesla. Tesla gets the money and decides when to sell. The underwriters get 0.5% for their "help". So no, it does not benefit them to drive the share price down.

 

[mikevbf]

Correct, here they can feed the market with more shares when they want, at the current market price.

Personally I think it's genius.

Wouldn't this short term incentivize the banks to push down the stock to get a better price or at least until these banks get a significant amount of the shares and don't want their shiny new stocks to look bad?
edit: lol I was beat to the same question with the obvious answer right above my post.

 

[Nocturnal]

Oof. Yes, you’re right. Very many variables. Depends on your circumstances. I should’ve clarified I was speaking for my own situation and circumstance. Like buying a car, in a loose analogy. I intentionally went from top of line (employer paid) to mid-model, as we are low users. $1k, early 50s, 2 dependents. Suitable deductibles and ann maximums, and cover other costs.

Edit: I orig thought you’d said $9k/mo. Had to reread,

I wish. I pay $500 a month for garbage insurance for just myself. 40, no medical issues and a high deductible.

 

[engle]

It probably got deleted because we've already been talking about and dissecting this for hours!

Sorry! I saw Reuter's news timestamp of 9:04 AM ET and did not scroll back far enough to see the earlier articles about it on my Fidelity Active Trader Pro Experience! (I'd just woken up from 4 hours sleep to watch the opening today.)

I only checked the current TMC page it the posts were mostly about the conspiracy theory (naked short selling of phantom shares, etc.)