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

[hobbes]

Elon interview at Giga Berlin, quite windy though..

 

[elasalle]

I'd be curious to hear reactions to this Tweet by JRP007. In a nutshell, he's arguing that much of the buying in recent weeks was from hedge funds hoping to engineer a squeeze when S&P500 index funds learn they must acquire TSLA. When Tesla announced the details of their $5 billion cap raise, it became apparent that Tesla was going to do what's necessary to keep a massive squeeze from taking place. Since Tesla's cap raise announcement, we've been seeing a decline in the stock price, which is some of these hedge funds unwinding their positions (still at a profit for most) because the big squeeze plan is going to be foiled by Tesla.

Sounds good, but it then negates the "phantom Share theory - Naked Sellers had to get all the stocks they owned for the account books, and after the split is done, they are free to do what they do best - unload naked shares".

I just hope Tesla is more focused on it's core manufacturing and doesn't pay too much attention on how to manage the market. ~ Cheers!!

(+ I kind of saw recent high price action as artificial and was expecting prices to go down post split. Only reason I did not sell into the big rise was due to potential of S&P, Battery Day and Q3 -- However, did sell CC's for Sept 18th, Oct 20 thinking tis would be the case)

 

[bubb]

Closed some covered calls (9/11 700s, a bit early but not much juice left) and watching for any plunge below LOD to sell (cash covered) short term puts. IV is sooo high but of course the stock really is quite volatile, so I'm trying to be very disciplined about options trades this week.

 

[StealthP3D]

My read of this Twitter thread is:
Tesla has installed a safety valve on the SP. For now, they have authorised shares to be sold of up to 5B. We don't know the limit they have set but let's say it's $1250. This will cap the SP until 2 million new shares are sold. Should the SP still look like it's running away, all it takes is another filing to the SEC. Unlike MMs, Tesla can legally produce an almost infinite amount of new shares. They would even benefit as they can buy them back for less after the dust settles.

Tesla is not in the business of trading their stock or capping the price. They are raising capital for expansion. Any limits they put on the price of shares sold would be regular market limit orders (which means the shares could be sold at any price above the limit price). To put an upper limit on the price would be acting contrary to shareholder interests (which would make it illegal).

To avoid obvious price caps it is almost a certainty that the shares available for sale would be divided into blocks, each with a different limit price. It's confusing to me why you picked an example price of 3 times the current price. That's not a realistic guess.

 

[Chenkers]

I don’t want to jinx it, but $405 seems to be the floor. It bounced off it both yesterday and so far today.

By my understanding if it goes below $402.63 then the uptick rule would be in place for an extra day. They wouldn't want to make that mistake again so $405 sounds like a reasonable buffer to bounce off from.

 

[Chunky Jr.]

If Tesla keeps executing on their plan, and the stock eventually gets to $1000 or more, it's going to be a roller coaster, not a ramp. Fasten your seat belts and enjoy the ride.

 

[JRP3]

If they're going to keep giving shares away I'll take them I guess. Can't pass up a bargain.

 

[Favguy]

Just bought another 37 at $410. Well it would have been rude not to...

 

[CLK350]

I'd be curious to hear reactions to this Tweet by JRP007. In a nutshell, he's arguing that much of the buying in recent weeks was from hedge funds hoping to engineer a squeeze when S&P500 index funds learn they must acquire TSLA. When Tesla announced the details of their $5 billion cap raise, it became apparent that Tesla was going to do what's necessary to keep a massive squeeze from taking place. Since Tesla's cap raise announcement, we've been seeing a decline in the stock price, which is some of these hedge funds unwinding their positions (still at a profit for most) because the big squeeze plan is going to be foiled by Tesla.

JRP007's explanation sounds very plausible - But we'll never find out for sure unless some staff at Citadel, Renaissance or some such has an awakening and comes forward with the pertinent information from the dark side; one practical solution might be to hire or start a GoFundMe for Harry Markopolos, who has some of the best sleuthing skills around.

Meanwhile just HODLing and wishing all "retail" investors/ traders would do the same - for their own good.

 

[Joe F]

If the current thinking is that former Big Bulls were front running S&P addition squeeze, and are now bailing out early because they doubted their vibe, I celebrate their self castration efforts, and wish them well in licking their wounds.

 

[M|S|M MYP]

Quoting myself and I promise this will be my last word on the subject, but just after posting this I got a call from Equiniti. It was a helpful chap who was very apologetic and said he understands how frustrating it has been. Added to which he is giving me £200 by way of apology for the inconvenience. That was a nice touch.

Should have told them 'i was gonna sell @$500...you just cost me $XXX in losses....£200 aint gonna cut it!!!"

 

[StealthP3D]

Such massive sell offs so quickly, on no news is what I interpret as manipulation. Dont have to agre with me obviously

While I agree that Tesla has been one of the most manipulated stocks of it's size, massive sell-offs of high flying stocks are completely normal and expected without any manipulation. So, it stands to reason, a massive sell-off is not evidence that it is being manipulated. It's going to happen regardless. You can't have a stock appreciating this quickly without periodic massive sell-offs. It just doesn't happen.

 

[StarFoxisDown!]

By my understanding if it goes below $402.63 then the uptick rule would be in place for an extra day. They wouldn't want to make that mistake again so $405 sounds like a reasonable buffer to bounce off from.

Today is definitely not about pushing the stock down. Nasdaq down big on decent volume. Tesla is lucky to only be down 8% when the Nasdaq is down 5%

 

[phantasms]

By my understanding if it goes below $402.63 then the uptick rule would be in place for an extra day. They wouldn't want to make that mistake again so $405 sounds like a reasonable buffer to bounce off from.

So if it doesn't hit it today the thinking would be a continued push down into the 3s tomorrow, no?

 

[ByeByeJohnny]

JRP007's explanation sounds very plausible - But we'll never find out for sure unless some staff at Citadel, Renaissance or some such has an awakening and comes forward with the pertinent information from the dark side; one practical solution might be to hire or start a GoFundMe for Harry Markopolos, who has some of the best sleuthing skills around.

Meanwhile just HODLing and wishing all "retail" investors/ traders would do the same - for their own good.

When I suggested, when the S&P inclusion became possible after Q2, that hedge funds could do exactly this kind of fore running, a lot of regulars here was pretty vocal about that being impossible because "why would they help other funds", "where would they get the money from", "why would the buy and then sell to other funds" etc etc.

I don't really subscribe to the theory that Tesla has made a move to prevent a run up from this. But I'm still convinced others have bought with intention to start selling to the index funds when announced.

It just makes sense for many hedgefunds (and others) to pounce on an almost certain profitable trade.

Edit: I can't help but notice that those most vocal then has been quiet on the subject the last few days when it's been brought up by more prominent twitter people.

 

[M|S|M MYP]

When $TSLA is down 6 digits in your portfolio the last 2 days and you're okay with it

 

[st_lopes]

17% of float is a massive amount. S&P Inclusion announcement will be fun

The current 20% correction is a healthy move for the next leg up to start

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Would the S&P market cap calculation not need to be adjusted for Tesla's inclusion (i.e., lowest cap gets dropped, Tesla gets added)?

 

[mad474]

+5 @ ~409

Nothing but trouble with the little ones at the beginning. But when they grow up, they'll take care of you, won't they? And they grow up so fast these days!

 

[M|S|M MYP]

Today is definitely not about pushing the stock down. Nasdaq down big on decent volume. Tesla is lucky to only be down 8% when the Nasdaq is down 5%

MSFT is down 5+%....when was the last time that happened?? Perfectly normal pull back after a historic run up.

 

[UCF3]

Even if you assume Tesla's move spooked the hedge funds the move yesterday seems like a bit of an overreaction. It is possible the split was designed to reduce the squeeze but nobody expected the hedge funds and other momentum investors to front run this in such a big manner. And then Tesla made the power move? It makes sense but you have imagine this request(to use the ATM offering to avoid a squeeze) came from S&P.

Here is something interesting(italics below) I found from an article about ATM offerings. The more I think about this the more it seems like this was a request from S&P. I also think S&P will give funds enough time to make their purchases and spread it out by each agent selling at a different time. It may not have been a move from Tesla per se but it does come across like that.

Engaging multiple ATM agents allows a company to have several options when considering brokerage platforms to use throughout the term of the ATM program. Notwithstanding having access to multiple platforms, the company cannot sell its securities under the ATM program with more than one ATM agent at the same time.

With Tesla there are no precedents so really tough to say what might be going on. I guess we will find out soon enough.

So really we have two theories so far; The Naked short covering and Hedge Fund front running. If I were to pick I would go with the first one. Or maybe a combination of the two.

I don’t believe JRP007’s explanation at all. If funds were front running then explain:
1. Why wouldn’t Baillie Gifford wait until the infinity squeeze to sell? They sold their shares even before Tesla’s cap raise announcement, so they clearly weren’t spooked by that.
2. If funds are front running then why are they selling right now with the risk that inclusion announcement could happen any night? People are trying to say the funds are spooked by $5 billion cap raise. That amount is less than 10% of what the Index funds alone must add. That doesn’t even take into account the amount the benchmarked funds must add.
3. Folks on CNBC that are fund managers have given interviews stating that they haven’t added TSLA yet and are happy that their benchmarks haven’t either because they would be underperforming their benchmarks. @FrankSG posted one such video last week.