Tracking short interest

[Gerardf]

I would like to have the opinion of the posters here on the following.

I think we can all agree that the institutional shareholders will hold the key to the decision in the vote on the SCTY acquisition.

Total shares available : 134M
Musk (non voting) : 31M
That leaves maximum 103M voting shares, so required for YES or NO majority is 52M votes / shares
Assuming Musk will not have made his shares available for shorting. So these 103M shares must be the source for the approx 29M shares sold short. 29M was the number June 15th, there are signals that number might be higher now !

Note that 29M is well over 55% of the 52M votes needed !

Note that that once shares are loaned out for shorting, the initial owner can not vote.

Source : What happens to the voting rights on shares when the shares are used in a short sale transaction? | Investopedia
Whichever source initially held the shares was also the holder of record. When the shares were used in the short sale transaction, the initial source lost its voting rights as it was no longer the holder of record. Even the margin account customer who holds the shares long will lose his or her voting rights in this situation - this is part of the margin account agreement.

It would not surprise me if shareholders, specially the institutional ones (who hold 93M of these 103 M), will want to take no risk of shorts voting against Tesla's and their own interest and make sure they can exercise their voting right. This would mean that at some point before the vote will happen, a not insignificant part of the holders of these 29M+ shorts might be 'requested' (read forced) to return the shares they borrowed !
(Considering the current interst paid for loaning out shares this might be just days before the vote happens).

Note that considering the importance decision nobody can cry foul on such action by the institutional holders.

In such situation Musk expression "a Tsunami of hurt" might not eeeh.. cover it for these shorts (Pun inteded )

Source:

time 2.45

Or am I overlooking something?
Or is this the reason hedge funds like Chanos and Citron are so nervous and loud.
( Is Musk maybe even creating / timing this situation on purpose to get rid of some shorts)

 

[Chickenlittle]

I would like to have the opinion of the posters here on the following.

I think we can all agree that the institutional shareholders will hold the key to the decision in the vote on the SCTY acquisition.

Total shares available : 134M
Musk (non voting) : 31M
That leaves maximum 103M voting shares, so required for YES or NO majority is 52M votes / shares
Assuming Musk will not have made his shares available for shorting. So these 103M shares must be the source for the approx 29M shares sold short. 29M was the number June 15th, there are signals that number might be higher now !

Note that 29M is well over 55% of the 52M votes needed !

Note that that once shares are loaned out for shorting, the initial owner can not vote.

Source : What happens to the voting rights on shares when the shares are used in a short sale transaction? | Investopedia
Whichever source initially held the shares was also the holder of record. When the shares were used in the short sale transaction, the initial source lost its voting rights as it was no longer the holder of record. Even the margin account customer who holds the shares long will lose his or her voting rights in this situation - this is part of the margin account agreement.

It would not surprise me if shareholders, specially the institutional ones (who hold 93M of these 103 M), will want to take no risk of shorts voting against Tesla's and their own interest and make sure they can exercise their voting right. This would mean that at some point before the vote will happen, a not insignificant part of the holders of these 29M+ shorts might be 'requested' (read forced) to return the shares they borrowed !
(Considering the current interst paid for loaning out shares this might be just days before the vote happens).

Note that considering the importance decision nobody can cry foul on such action by the institutional holders.

In such situation Musk expression "a Tsunami of hurt" might not eeeh.. cover it for these shorts (Pun inteded )

Source:

time 2.45

Or am I overlooking something?
Or is this the reason hedge funds like Chanos and Citron are so nervous and loud.
( Is Musk maybe even creating / timing this situation on purpose to get rid of some shorts)

Your imbedded video is about 4 yrs old. How does it support your argument?

 

[Gerardf]

Your imbedded video is about 4 yrs old. How does it support your argument?

No, that was just meant as source for Elon's famous quote.

My argument is the fact that 29M (possibly more) shares are currently sold short, and thus the initial owners of these shares can not excersise their voting rights as long as these shares are loaned to these shorts. 29M votes out of the total of maximum 103M voting shares is a very significant part and can certainly influence the outcome.

My argument is that shareholders are likely wanting to claim their voting rights, and can only do that by recalling the shares loaned to shorts. I realize this is unusuall, but this is an unusuall situation.

But maybe I am overlooking something.

 

[Yonki]

Fidelity:
Lend TSLA: 2.0%
Short TSLA: 11%, 519,714 shares available to short

Lend SCTY: 22.75%
Short SCTY: 40.0%, 0 shares available to short

Fidelity:
Lend TSLA: 2.0%
Short TSLA: 12.25%, 302,089 shares available to short

Lend SCTY: 22.75%
Short SCTY: 40.0%, 0 shares available to short

 

[MitchJi]

I don't believe that Elon would time an offer to produce this effect.

It sounds to me, like this could happen. If or when it starts to happen it will probably be after the results of the due diligence are announced. I think most shorts expect the SP to drop further after the due diligence phase is complete and they won't want to give up potential gains. The question becomes will this happen and if so when. Gradually over the 2-3 months before the vote, or all at once near the end.

Another question is will the institutions attempt to exacerbate this effect.

 

[Yggdrasill]

It would not surprise me if shareholders, specially the institutional ones (who hold 93M of these 103 M), will want to take no risk of shorts voting against Tesla's and their own interest and make sure they can exercise their voting right. This would mean that at some point before the vote will happen, a not insignificant part of the holders of these 29M+ shorts might be 'requested' (read forced) to return the shares they borrowed !

The voting rights aren't held by the shorters! The shares that the shorters borrow are immediately sold, and thus end up in the hands of longs.

Maybe some shares will be requested returned, but I guess a lot of the shares sold by the shorters end up right back in the hands of the institutional shareholders.

Basically, an institutional shareholder with 1 million shares might lend out 500k shares, then turn around and buy 500k shares on the market. The net effect on the market is zero and the end result is the institutional shareholder owns 1 million shares *plus* an IOU for 500k shares.

 

[Yonki]

Fidelity:
Lend TSLA: 2.0%
Short TSLA: 12.25%, 302,089 shares available to short

Lend SCTY: 22.75%
Short SCTY: 40.0%, 0 shares available to short

Fidelity:
Lend TSLA: 2.0%
Short TSLA: 10%, 175,446 shares available to short (weird that rate went down as available shares declined - probably some sort of delay around when they update the rates)

Lend SCTY: 22.75%
Short SCTY: 40.0%, 0 shares available to short

My take on the above conversation: As wonderful as a scenario where a vote on this merger would call in all (or a lot) of shorts, I don't see it happening as a direct result of the merger. The standard way of dealing with loaned shares is to have them stay loaned out, and someone (the person who bought my shares from the guy who shorted my shares?) else gets to vote. Fidelity could decide to call in all loaned shares before the vote, but this A) could be seen as a form of stock manipulation by Fidelity (since this actuation would be out of the ordinary) and more importantly, B) would really screw all the shorts who are also Fidelity customers - those shorts (and probably all other current/future stock shorters) would never trade with Fidelity again. So I don't see any effect if those of us with loaned shares do nothing.

If we want to vote we need to call our shares back as individuals. If enough shareholders do it at the right time (a few days before "shareholders of record" gets recorded for the vote?), it might not be a tsunami, but it could still have an effect...

 

[neroden]

I would like to have the opinion of the posters here on the following.

I think we can all agree that the institutional shareholders will hold the key to the decision in the vote on the SCTY acquisition.

Total shares available : 134M
Musk (non voting) : 31M
That leaves maximum 103M voting shares, so required for YES or NO majority is 52M votes / shares
Assuming Musk will not have made his shares available for shorting. So these 103M shares must be the source for the approx 29M shares sold short. 29M was the number June 15th, there are signals that number might be higher now !

Note that 29M is well over 55% of the 52M votes needed !

Note that that once shares are loaned out for shorting, the initial owner can not vote.

Correct. However, you seem to be confused. The person who shorts them certainly has no voting rights. If a short-seller borrows my shares today, the short-seller immediately resells the shares to a *new long*. Someone who is buying into Tesla *today*. The new long is perhaps even more likely to vote for the merger than an "old long" like me was.

It is possible to borrow shares for purposes other than shorting. But it's very unusual. I doubt that any significant number of shares are being borrowed just for the purposes of voting them -- you'd have to be a big institution with a special relationship with your broker to even have the *opportunity* to do that. You'd have to watch for something bizarre like a large drop in the number of shares shorted at the same time as a large rise in the interest rates paid to people for lending their shares out.

The standard way of dealing with loaned shares is to have them stay loaned out, and someone (the person who bought my shares from the guy who shorted my shares?) else gets to vote.

Yep, the guy who bought your shares from the guy who shorted them. My guess is that this guy is going to be in favor of the merger, if you think about it... because this guy bought shares after the merger announcement.

So unless something really unusual is going on, the only people who would want to call their shares back in order to vote them are the ones who want to vote "no" -- because at the moment their shares are probably held by "yes" voters. That's my guess.

 

[Gerardf]

Correct. However, you seem to be confused. The person who shorts them certainly has no voting rights. If a short-seller borrows my shares today, the short-seller immediately resells the shares to a *new long*. Someone who is buying into Tesla *today*. The new long is perhaps even more likely to vote for the merger than an "old long" like me was.
<Snap>

I was aware that those shorts could not vote. I was thinking that the 'real' owners will want to make sure they could make their vote count while their shares were loaned out. Yggdrasill also explained how that works

 

[Yonki]

Fidelity:
Lend TSLA: 2.0%
Short TSLA: 10%, 175,446 shares available to short (weird that rate went down as available shares declined - probably some sort of delay around when they update the rates)

Lend SCTY: 22.75%
Short SCTY: 40.0%, 0 shares available to short

Fidelity:
Lend TSLA: 3.5%
Short TSLA: 7.75%, 288,643 shares available to short

Lend SCTY: 23.50%
Short SCTY: 45.0%, 0 shares available to short

 

[SBenson]

Looking at MarkIt data since the merger announcement, TSLA short-interest jumped by about 4mln shares, while SCTY short-interest remained flat.

 

[Yonki]

Fidelity:
Lend TSLA: 3.5%
Short TSLA: 7.75%, 288,643 shares available to short

Lend SCTY: 23.50%
Short SCTY: 45.0%, 0 shares available to short

Fidelity:
Lend TSLA: 4.5%
Short TSLA: 10%, 219,142 shares available to short

Lend SCTY: 23.5%
Short SCTY: 60.0%, 0 shares available to short

 

[uselesslogin]

Fidelity:
Lend TSLA: 4.5%
Short TSLA: 10%, 219,142 shares available to short

Lend SCTY: 23.5%
Short SCTY: 60.0%, 0 shares available to short

I'm seeing 18% to short at IB for TSLA. That is the highest I have ever seen. I can't believe they are piling in even when bearish analysts are going neutral as well as well known shorts.

 

[TheTalkingMule]

It may be squeeze o'clock if these rates hold up for a bit. Need oil to stay afloat(sadly).

 

[Yonki]

To short TSLA is currently 12% and 150k shares at Fidelity. Not 18% yet but it's rising...

 

[neroden]

I'll tell you how a proper short-squeeze happens. We haven't seen one in TSLA yet.

So, *some* of the shares of TSLA are held by long-termers, but many are held by short-termers who will sell if the "price is right".

Short-sellers have borrowed shares and resold them. So with 32 million shares short and a float of 134 million shares, there are actually 166 million shares long -- because each shorted share is held by *two* longs, the lender and the second buyer.

When the shorts go to cover their bet, they typically buy back from the short-term longs. The long-termers have no interest in selling...

If there are more than 134 million shares held by long-termers, then there will be less than 32 million shares held by short-termers. It becomes impossible to cover the short position at any price. The shorts will bid up the price to astronomical levels, maybe $1000/sh, $3000/sh, etc, until they manage to convince a long-termer to sell early.

Short-sellers typically will bail out if they see even a hint of this happening. Sometimes, however, they get caught, as in the VW short squeeze, which was engineered by Porsche buying up shares (Porsche, obviously, was a *long-term* holder).

 

[dakh]

From what I can tell brokerage houses also have checks and balances in place to be able to accommodate some amount of short covering. So looks to me there also has to be a catalyst event that creates an unusually sharp short covering that overwhelms brokerages, like a bank run.

 

[Yonki]

Fidelity:
Lend TSLA: 4.5%
Short TSLA: 10%, 219,142 shares available to short

Lend SCTY: 23.5%
Short SCTY: 60.0%, 0 shares available to short

Fidelity:
Lend TSLA: 6.0%
Short TSLA: 12%, 137,137 shares available to short

Lend SCTY: 23.5%
Short SCTY: 60.0%, 0 shares available to short

 

[TheTalkingMule]

I'll tell you how a proper short-squeeze happens. We haven't seen one in TSLA yet.

Certainly we saw something similar with TSLA in 2013? Longs had $100+ as a price target and a huge percentage of shares were shorted. Similar to SCTY right now, at least the price to short was similar.

 

[adiggs]

Certainly we saw something similar with TSLA in 2013? Longs had $100+ as a price target and a huge percentage of shares were shorted. Similar to SCTY right now, at least the price to short was similar.

Ah the good ol days. Didn't the interest rate to short TSLA go over 50% or something outlandish?