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

[Johan]

check the past two days, there are a lot of sellers.

Touché

The counter argument is that the volume in the last week or so has been very timid, nothing close to the expected demand from index funds when that day comes.

 

[chrsk]

check the past two days, there are a lot of sellers.

The amount one the closing is not that high. I think it’s still a fair question.

 

[RubberToe]

Tesla China now producing Model Y. 44 finished cars on site. End of video shows next major phase of expansion in adjacent melon field is underway

 

[mongo]

Not forgetting, and it does not matter who trades what how many times. Sitting on your hands and NOT trading is an investment decision. You CHOOSE to let the market action proceed w/o interacting.

Shares are fungible. It is the result that matter, only. And that is measured by the Mkt cap. Indeed, nothing is knowable about who is trading. Pining for that is futile, such information does not exist.

Cheers!

You're saying that nothing is knowable about how many traders have been willing to part with their shares, nor the price they would do so at.
If nothing is knowable about who is trading, then was your original post that started this sub topic misrepresenting your position? This is where (at least this part) of the peanut gallery is confused:

Pretty simple, really. About $234B of capital* flowed into TSLA between the S&P announcement (Nov 16) and the Close on the freeze date (Dec 9th).

Recent estimates are that about $80B in TSLA equity will need to be transfered to Index Funds. That's about 34% of the capital that's already moved.

So, do you think fewer than 1 out of 3 shares purchased over the past month will become available through the market for Index funds to buy?

TL;dr Yes, it's quite possible that there is enough liquidity in the system to avoid a large SP spike. That's likely what the S&P meant when they said this in their Nov 30 announcement:

"In its decision, S&P DJI considered the wide range of responses it received, as well as, among other factors, the expected liquidity of Tesla and the market’s ability to accommodate significant trading volumes on this date."​

*Note: yes, shares issued by Tesla on Dec 11 for the the $5B cap raise will be counted in TSLA weight for the S&P 500

From the top quote, you seem to be saying we can't know the net dollar amount spent on TSLA (outside the $5B), nor the number of actively traded shares. Yet in the second quote you appear to be giving that very data.
Can you understand our confusion?

Spoiler: more discussion

Yes, shares are fungible, but traders are not (as least between investment styles. That is why there are things like float adjusted market cap.

Liquidity is dependent on a large pool of sellers/ buyers (or small pool with lots of shares). HFT algobots moving a million shares back and forth is only a million shares in play.
The average volume over that 15 day period is 62 million shares. The theoretical max number of unique shares that traded hands is 930 million (more than the float, and not what happened). If only short timeline traders were in play and only traded an average of once a day, then only 62 million shares were in play. If they averaged two trades a day, then only 31 million shares traded hands. True shares in play is not known, so the ability of S&P 500 funds to acquire their shares is not known.

 

[dl003]

Touché

The counter argument is that the volume in the last week or so has been very timid, nothing close to the expected demand from index funds when that day comes.

If you hold shares then it’s irrelevant. However, if you hold short term bets, my friend would say don’t do it before a binary event. Many have only ASSUMED there would be more buyers than sellers and the higher volume automatically would translate into higher share price. This is not the case all the time. We have crashed hugely on huge volume before. My friend is a very good trader.

 

[Rhoon-NL]

This is a compelling case. But the big question is who are the sellers? The Closing Cross is a very good way of buying a huge amount of share at once at a fixed price, yes, and that makes the index fond's job much easier (tracking the index). But a transaction performed during the Closing Cross is still a transaction that must have a seller for each buyer. So who are the sellers?

I agree that is the big question. The S&P 500 committee apparently expects that there will be enough sellers. They stated that they expect no (major) share liquidity problems. And as @Artful Dodger pointed out: it is possible that front runners collected enough shares since the announcement.

 

[jerry33]

MMs make money when the market does the opposite of what most option buyers think will happen.
It does almost seem like a nice and honest job when your job is to screw the greatest number of people.

Assumes the buyers and sellers are using options or margin. Buy and hold, sell when funds are needed makes the least money for Wall Street and the most money for investors (on average, some people win the lottery too).

 

[Driver Dave]

So what’s the deal?

1 funds have already bought

2 funds will just exchange from other funds they own

3 nothing has happened yet but it will soon

4 it will all go down 3:59 Friday

 

[Johan]

So what’s the deal?

1 funds have already bought

2 funds will just exchange from other funds they own

3 nothing has happened yet but it will soon

4 it will all go down 3:59 Friday

1. No (not as of yesterday, according to public information that they update daily themselves)

2. I theory possible but uknown if and if so how much of the required volume that would cover.

3. Somethings always happening, but the index fund buying hasn't happened yet (see 1)

4. Your bet is a good as anyone's.

 

[ByeByeJohnny]

Interesting how a few of us were ridiculed several weeks ago suggesting that other funds/speculators could buy up shares in advance with the intention of selling to index funds on inclusion date.

So many reasons were given why this would not happen.

Why would they do that? Where would that money come from? Why would they then sell to the index funds? That would be fraud against the investors of those front buying funds!!! What was the point for them to do that? Etc etc.

Now in just a few days seems like almost everyone is suddenly thinking, yeah of course there's been front buying, why wouldn't there be?

I guess we'll know tomorrow.

 

[Rhoon-NL]

So what’s the deal?

Could only by of interest for short term plays. Long term it is just noise.

 

[Nocturnal]

I'm expecting a solid quarter for energy storage. From what I'm hearing from people trying to order, power walls are out of stock until at least March.

Interesting how a few of us were ridiculed several weeks ago suggesting that other funds/speculators could buy up shares in advance with the intention of selling to index funds on inclusion date.

So many reasons were given why this would not happen.

Why would they do that? Where would that money come from? Why would they then sell to the index funds? That would be fraud against the investors of those front buying funds!!! What was the point for them to do that? Etc etc.

Now in just a few days seems like almost everyone is suddenly thinking, yeah of course there's been front buying, why wouldn't there be?

I guess we'll know tomorrow.

Big difference between a speculator buying the stock with the intent to sell vs a fund defrauding it's own investors to help out another fund managed by the same company.

 

[Right_Said_Fred]

Would this be a possible scenario?

- Flat today
- Flat tomorrow
- Big spike tomorrow after hours, during closing cross.
- Drop back to flat after hours
- Flat (or lower) opening on Monday

This would be a spike most traders (especially option buyers) cannot profit from.

 

[Pezpunk]

check the past two days, there are a lot of sellers.

no there aren’t. Volume has been non-existent.

 

[ByeByeJohnny]

Big difference between a speculator buying the stock with the intent to sell vs a fund defrauding it's own investors to help out another fund managed by the same company.

There is no defrauding involved. Actually it would be defrauding not to get in on a good deal.

1. S&P inclusion announced. The likely short time is that share price will go up rather than go down. Longterm unclear.
2. Index funds need availability to buy at index starting price.
3. Front running funds/speculators can get a certain out.
4. Make a deal in advance.

So many seems to think that having a guaranteed buyer is bad when it's actually a good thing. Anyone front buying would not have done so to stay in Tesla for the long run. If so they would have gotten in long ago. No they love a short term deal with a very likely upside. Ask any fund investor if they want to get in on a deal that is more likely than not to net them 5-10% in a month with a guarantee of selling at market price for potentially more. That's not defrauding. That's making a great deal.

 

[JBRR]

Would this be a possible scenario?

- Flat today
- Flat tomorrow
- Big spike tomorrow after hours, during closing cross.
- Drop back to flat after hours
- Flat (or lower) opening on Monday

This would be a spike most traders (especially option buyers) cannot profit from.

You can if you call your broker.

 

[ByeByeJohnny]

Would this be a possible scenario?

- Flat today
- Flat tomorrow
- Big spike tomorrow after hours, during closing cross.
- Drop back to flat after hours
- Flat (or lower) opening on Monday

This would be a spike most traders (especially option buyers) cannot profit from.

I think this depends on how many shares are 'missing' after closing cross on Friday. If it's a "few" then a quick run up in after hours where buying and selling funds have a chicken race until the index funds have what they need.

Seems like a likely scenario to me.

Of course if more than a "few" are missing then it's any ones guess what happens after hours and on Monday.

Not sure how many "few" are though. Maybe 5 million shares?

 

[Nocturnal]

There is no defrauding involved. Actually it would be defrauding not to get in on a good deal.

1. S&P inclusion announced. The likely short time is that share price will go up rather than go down. Longterm unclear.
2. Index funds need availability to buy at index starting price.
3. Front running funds/speculators can get a certain out.
4. Make a deal in advance.

So many seems to think that having a guaranteed buyer is bad when it's actually a good thing. Anyone front buying would not have done so to stay in Tesla for the long run. If so they would have gotten in long ago. No they love a short term deal with a very likely upside. Ask any fund investor if they want to get in on a deal that is more likely than not to net them 5-10% in a month with a guarantee of selling at market price for potentially more. That's not defrauding. That's making a great deal.

If my fund manager considers anything more than maximizing my return that's fraud. If $622 was the highest price they could see happening then they should sell today. If they have some sort of set deal at a higher price, then perhaps that would be legit. If they entered into a deal last month when the stock price was far lower for a set price above that then perhaps that would be kosher as well.

 

[2daMoon]

Having said that, this is all totally unfamiliar territory. I am a back seat passenger, seat belt is on, doors are locked and I'm not interested in getting out of the car. I can't see any of the road in front of us but I do know where we are going.

So, you sprung for the FST (Full Self Trading) option when you bought your TSLA?

Me too.

 

[traxila]

I am a jinx but I am going to say it anyway:

Think we will see green today!

In addition, maybe we will not see 1000, or even 700 but there will be steady buying pressure the next two days.

My prediction, FWIW.