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Last time their capital raise was at the closing price that day (ie. 92 I believe)
mershaw2001
I'm short the short sellers
Just a note that today short analytics is reporting that a WHOPPING 62% of shares were sold short. This is up from the 40-->50-->55% run up we had when we last topped out at about 250 before the quick fall to 240. I am going to use this as a serious catalyst and start buying the weeklies. I don't believe this situation can remain in equilibrium for too long. It might be wise to grab a few weekly puts too.
Thanks, do you know what the source is for this "short analytics"? I wonder how reliable it is compared to the NASDAQ release
Anyone familiar with convertible arbitrage and how this might affect TSLA price action?
From Feb 26 prospectus:
"We expect that many investors in, and potential purchasers of, the notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the notes. Investors that employ a convertible arbitrage strategy with respect to convertible debt instruments typically implement that strategy by selling short the common stock underlying the convertible notes and dynamically adjusting their short position while they hold the notes. Investors may also implement this strategy by entering into swaps on our common stock in lieu of or in addition to short selling the common stock. As a result, any specific rules regulating equity swaps or short selling of securities or other governmental action that interferes with the ability of market participants to effect short sales or equity swaps with respect to our common stock could adversely affect the ability of investors in, or potential purchasers of, the notes to conduct the convertible arbitrage strategy that we believe they will employ, or seek to employ, with respect to the notes. This could, in turn, adversely affect the trading price and liquidity of the notes."
From Feb 26 prospectus:
"We expect that many investors in, and potential purchasers of, the notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the notes. Investors that employ a convertible arbitrage strategy with respect to convertible debt instruments typically implement that strategy by selling short the common stock underlying the convertible notes and dynamically adjusting their short position while they hold the notes. Investors may also implement this strategy by entering into swaps on our common stock in lieu of or in addition to short selling the common stock. As a result, any specific rules regulating equity swaps or short selling of securities or other governmental action that interferes with the ability of market participants to effect short sales or equity swaps with respect to our common stock could adversely affect the ability of investors in, or potential purchasers of, the notes to conduct the convertible arbitrage strategy that we believe they will employ, or seek to employ, with respect to the notes. This could, in turn, adversely affect the trading price and liquidity of the notes."
It's also interesting to note from the Feb 26 prospectus:
"In connection with the offering, the underwriters may purchase and sell notes and common stock in the open market. These transactions may include stabilizing transactions, short sales and purchases to cover positions created by short sales. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the notes while the offering is in progress. Short sales involve the sale by the underwriters of a greater number of notes than they are required to purchase in the offering. If the underwriters create a short position in the notes in connection with the offering, the underwriters may cover that short position by purchasing notes in the open market or by exercising all or a part of the option to purchase additional notes described above"
The offering closed today at about the same price as it started at the beginning of the offering period. Coincidence or price stabilization? If price stabilization, then in which direction?
"In connection with the offering, the underwriters may purchase and sell notes and common stock in the open market. These transactions may include stabilizing transactions, short sales and purchases to cover positions created by short sales. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the notes while the offering is in progress. Short sales involve the sale by the underwriters of a greater number of notes than they are required to purchase in the offering. If the underwriters create a short position in the notes in connection with the offering, the underwriters may cover that short position by purchasing notes in the open market or by exercising all or a part of the option to purchase additional notes described above"
The offering closed today at about the same price as it started at the beginning of the offering period. Coincidence or price stabilization? If price stabilization, then in which direction?
pz1975
Active Member
Very interesting! I dont understand one part though - was the stabilization only done to keep the stock from going down, or also to keep it from going up in this period? If the former only, then I imagine it will go down tomorrow, but if it was kept from going up or down, then it could go either way although in that situation I would expect it to go up because it seemed to start strong and go down most days lately, ie. the stabilization was keeping it from going up.
mershaw2001
I'm short the short sellers
The short analytics report is definitely not something that can be compared with short interest. Short analytics takes information from a decently large number of brokerages (but definitely not all of them) and reports what percent of transactions in a particular day were short sales. That doesn't give you a picture of the landscape, just lets you know how much short selling was going on in a particular day. Shortsqueez or nasdaq gives you the % of all shares that are sold short. That's calculated twice per month, not at 8 pm like shortanalytics is.
Good details DaveT, thanks.
i think when the above is stating that if the institutional investors of the converts hedge by shorting swaps on TSLA then that could be a risk of unregulated shorting....this is true because the market maker buying the swaps then is turning around and shorting the stock with preferential rules and tax consequences that market makers get...
for example, they don't necessarily have to have a 'locate' on the short if it's extremely hard to borrow again where there are no shares left to short and they are dong that to hedge their market-making...
Great find. This is how I understand it:
If you hold the notes, you might want to short TSLA to hedge the note. But if there are no shares to short, then people might not want to buy the notes if they can't hedge by shorting the stock.
Overall, I believe this to be immaterial at this point in time. I think that it might become more important when TSLA stock is trading above conversion price.
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I think this is more interesting, because it is possible that the market makers have been holding TSLA share price artificially high.
mershaw2001
I'm short the short sellers
This sort of action seems to hedge in order to take advantage of the interest rate... but the Tesla interest rate is like 1.5%
It could explain the reasons for the relatively flat movement since last week. Even that dip down to ~235 was extremely short lived, as was the pop up towards 260. Now that the offering has been completed, let's see what TSLA does the rest of the week.
pz1975
Active Member
Does this work both ways - ie. could it also be that they have been holding it artificially down? From reading it, it looks like the stabilization only works in one direction - keeping it propped up. If that is the case, should we not expect a move downwards over the next few days/week with the need to stabilize it gone now? Maybe I am completely wrong, but maybe some short-term puts would be a smart play to capture that.
Causalien
Prime 8 ball Oracle
I am actually very surprised that most of you don't already know all this. I went about with the thinking that most people know about market makers stabilizing the offering price during the offering. Especially with a big power mover like GS. The shorting of stocks, I think will happen after the stock price rose above conversion price. Which would represent a ceiling.
While most of my dinner parties these days consist of my kids spitting up on me, I did manage to get out last night and talk with some people. I was talking with a very successful, bright , articulate hedge fund manager, (his fund is usually top five or so in Canada ) who noted he has now shorted Tesla at 250. Told me a lot of 'smart money' has now entered the short position. I tried to warn him, but was met with a lot of the same old traditional valuation method numerical responses.
I found it very interesting to see the convergence of a line we read so often in this thread...'new shorts will come in', with my 'real' life.
After the conversation, I could not help but think, 'yep, wall street still does not get it'.
I found it very interesting to see the convergence of a line we read so often in this thread...'new shorts will come in', with my 'real' life.
After the conversation, I could not help but think, 'yep, wall street still does not get it'.
pz1975
Active Member
I think it depends on what their exit point is. If they are planning to hold until TSLA is 150 or something then yes, enjoy the hurt. If they are expecting a minor pullback and are hoping for a 5-10% correction and then plan to cash out then I see the argument considering the dramatic spike up lately. I am still 100% in the bullish side but I cannot deny the potential for a small pullback (in which case I will just add more LEAPS).
I agree with this. All my positions are now long-dated, as I have absolutely no idea what the next six weeks will bring. I'm confident in the long-term trajectory, but not the near-term dips and peaks.
mershaw2001
I'm short the short sellers
My oh my, isn't this surprising, the short interest is near the record high. Ok, time to buy those home run calls soon.
31,295,800
Read more: http://www.nasdaq.com/symbol/tsla/short-interest#ixzz2vgkzewya
31,295,800
Read more: http://www.nasdaq.com/symbol/tsla/short-interest#ixzz2vgkzewya
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