TSLA Market Action: 2018 Investor Roundtable

[Sudre]

If 50% of institutional investors will be selling, shorts will have no trouble covering.

I had to laugh because you think the institutional investors are going to sell tomorrow?
They have to sell in the last second of the last day AFTER all the shorts cover. Actually the shorts HAVE to cover first because the institutions are the ones that loaned out the shares. They can't give back or sell what they loaned out.

 

[ZachShahan]

Elon said no investor would have control. Wonder if the juice to get China to agree to a "privately" owned foreign business in China was allowing them to make a substantial investment - but not controlling - in the TSLAP he was putting together. Plausible? After all, I think TSLA is the first foreign entity that secured Chinese approval to own their whole business there.

It seems 100% clear Elon is not giving anyone control of the company. That was reportedly part of the reason SoftBank didn't agree to help take it private when approached about it last year.

 

[CuriousSunbird]

Tesla has 170 million shares outstanding. Out of those, 35 million have been lent to short sellers to short them. There are effectively 205 million shareholders -- 170 million people who actually own shares, and 35 million who bought shares and consider themselves shareholders but have lent their shares to short sellers, who have sold them to someone else (the actual owner of those shares).

So short sellers essentially create additional shares, at least in terms of increasing supply of shares for people to buy.

So let's break it down a little more.

Munster says insiders own 25% of the 170 million actual shares, or 42.5 million shares.

He breaks the rest down as 12% retail, 63% institutional out of 170 million. But there are 205 million effective shares held, so the actual numbers using his 12/63 ratio are:

26 million retail (0.12/0.75*(205-42.5 million)) and 136.5 million institutional shares (0.63/0.75*(205-42.5 million)).

Let's assume 80% of retail shares and 50% of institutional shares are kept and the rest sold.

That means a total of 5.2 million retail shares (0.2*26 million) and 68.25 million institutional shares (0.5*132.5 million) need to be bought for a total of 73 million.

Who is going to buy those 73 million shares?

Short sellers have to buy back about 34 million shares or almost half.

This leaves only 39 million that need to be bought by the new investors or by other buyers who come into the market for the opportunity to own TSLA before it goes private, including existing buyers who want to add to their shares.

Even if there are no existing shareholders or new shareholders who want to buy into TSLA before it goes private (unlikely), the new investors (Saudis or whoever) need to come up with only $16.4 B (39M shares * $420/share).

Edit: math

I think you’ve missed the new shares coming from the convertibles.

 

[ZachShahan]

Very good point about not wanting a Chinese JV. Some slight differences (thinking out loud which is probably a terrible idea...)

• Chinese Gigafactory 3 JV - Chinese partner owns 50% of the new plant in China. Tesla would have to share profit with Chinese partner on everything in China.
• If a Chinese entity bought 30% or so of Tesla Inc; then they are just a "private shareholder."

I'm sure Elon prefers US based financing.

But another country flush with cash is the Norway's Sovereign Wealth Fund which I believe they like to invest in non fossil fuel industries. The fund earned $131 billion in 2017 (Billion with a B!) That's a lot of money.

A commenter on CleanTechnica noted today that it couldn't be Norway:

"Earlier in the year Norway's government blocked the fund from investing in private companies. On the equity side they are only allowed to invest in listed companies and companies with firm plans to go public. This is from Reuters in April: 'Norway’s $1 trillion sovereign wealth fund, the world’s largest, should not be given permission to invest in unlisted companies, the Nordic country’s finance ministry said in recommendations to parliament on Tuesday, rejecting the fund’s own advice.'"

 

[Dan Detweiler]

*bankwupt
— a little different

I actually typed that and got autocorrected!

Dan

 

[CuriousSunbird]

The problem is that people are confusing things. Tesla has not entered into an agreement or "secured financing". Elon has personally "secured financing" and made an offer. As far as I can tell that doesn't qualify as requiring an 8k disclosure. (Tesla doesn't have to tell the world every time someone makes them an offer.)

If the board/Tesla "secured financing" or entered into an agreement then the 8k disclose requirement kicks in. (At which point they have 4 business days.)

I agree that Tesla doesn’t have to tell the world every time someone makes them an offer.

However, I think Tesla DOES have to tell the world every time THEIR OWN CEO makes them an offer.

 

[jhm]

But she also said she'll come back in 10 years or so if you stick with her.

Semiannual liquidity events are pretty sexy too. I mean, who has time for 5 liquidity events per week anyway?

 

[Jayjs20]

In all honesty, any guesses on how high the price could go on an epic squeeze?

I'm planning to keep most of my money in private Tesla, but if it jacks up to $2000 or even $1000, I might be tempted to sell.

I have absolutely no idea.

Other people in this thread seem to be going off of Elon's claim that it'll be bigger than VW's squeeze. I've heard numbers like 2500 and 3000 being thrown around, but I think that's a bit too ambitious.

 

[Fact Checking]

I think you’ve missed the new shares coming from the convertibles.

The totality of convertible notes represents only around 9 million shares - much smaller than the short interest of ~34 million shares. Also, Tesla has the option to pay those convertibles not in shares but in cash, even if convertible note holders decide to convert.

 

[Boomer19]

Not enough buying/selling power: the 2019 convertible notes have a face value of $920m, which is ~2.5M shares at the initial conversion price. Even if all of the note holders decided to take profits (unlikely: the whole $420 plus the potential short squeeze is a high payoff free ride with face value being paid back in the worst case), it 2.5M shares probably wouldn't be enough to explain today's price action - let alone the last 3 days.

My guess is that either more shares or a highly leveraged options position is behind it.

well they used derivatives to hedge their derivatives haha
JPMorgan Recommends Tesla ‘Crash Puts’ With Tail Risk Rising

they could have kept this process going once june passed

 

[Sudre]

Sorry this is not on topic but.... I CAUGHT UP. You people are slacking in your posting.

Now on to the next topic

 

[CuriousSunbird]

Maybe the mystery money is BYD + Buffett.

 

[mongo]

In all honesty, any guesses on how high the price could go on an epic squeeze?

I'm planning to keep most of my money in private Tesla, but if it jacks up to $2000 or even $1000, I might be tempted to sell.

I have GTCs from 1k to 4k based on liquidity and desire to be in private Tesla (<50% in orders). Really, we're fine with 420 in the trading account if we can shift the IRAs to T-SLAP. Otherwise the squeeze money will cover some of the conversion costs if we have to go through cash...

 

[oneday]

All I know if there is a squeeze, I hope it happens before December, so I can use the proceeds to execute my 300 calls.

 

[ggr]

They can't give back or sell what they loaned out.

Ooh! Ooh! I forgot that!

 

[Reciprocity]

Yes, but once the shorts purchase the shares needed to cover, do you think they will roll into TSLAP? Cynically, maybe they do an about face and see it as the best chance to cover their losses , but that seems a little too ironic. In which case, the "investors" will need to pay them their $420 per share, adding back the $13B they spent to buy out the institutional shareholders.

Lol, when shorts purchase share back, they don't get to keep them. They owe them to someone else. They originally borrowed them and sold them. They hope to buy them back at a cheaper price and keep the difference. Minus and interest paid for borrowing the shares.

 

[EinSV]

There is a sense in which I really don't understand your question. They already hold Tesla stock, for reasons they believed at the time. Why would they sell it other than in the normal course of rebalancing? (By that I mean that particular funds might have guidelines like "No more than 5% in any one stock", and Tesla might have appreciated by 15% after the Q2 conference call, and might now be at 5.5% of the dollars in the fund, so sometime between now and the end of the quarter they have to sell that 0.5%.) Now, nothing about what's happened in the last couple of days implies that Tesla's actual production/profit/market has changed in any negative way (unless you believe the crap about Elon going to jail for lying, which I don't). And with an offer to sell it for $420 in a month or three, it would be very irresponsible for them to sell for $352.45 today. Who is selling? Shorts and panicking weak longs. IMHO.

Thanks — I think that answers my question.

 

[PaulusdB]

Semiannual liquidity events are pretty sexy too. I mean, who has time for 5 liquidity events per week anyway?

You should become shareholder just to have access to those two parties every year.

 

[neroden]

There's really just four things that make sense in my mind:

• Market maker with literally tens of millions of exposure or excess shares - 5 million shares are peanuts in comparison,
• Some really big player is on the wrong side of a big options play, with options worth more than 5 million shares,
• Some really big player with 5+ million shares who thinks that by walking down the price to $350 and then walking it back up (and taking advantage of all the shorts and momentum traders that jump on this move) results in a net accumulation of shares. I'm not sure this is true - any significant move up will I think be very bullish.
  
• Hidden, market moving information we are not aware of,
• Something else.

Still very puzzled about it!

Well, when I've looked up major holders on sites which track holders of *options*, I've discovered there are some speculative funds doing MASSIVE plays in options on TSLA Options worth more than 10 million shares, more than 20 million, more than 30 million.

So maybe a big player is on the wrong side of an options trade. This seems very plausible.

 

[bdy0627]

I see no indication in in the MSNBC article that Elon is or is not lying about having secured funding. It says:

"It also still isn't clear if Tesla has committed financing. Musk tweeted he had "funding secured" on Tuesday when he said he was considering taking the company private at $420 per share. Tesla has declined to comment on funding for the transaction, leading to speculation Musk doesn't have committed financing and drawing a request for more information from the U.S. Securities and Exchange Commission."

Where are you seeing any new evidence in support of Elon's funding assertion?

There is no definite evidence either way. This is just an occam's razor approach, keeping it simple and not trying to speculate about alternatives to what appears to be happening. What appears to be happening is that Elon is considering a buyout and has figured out funding for it. Now the board is evaluating it. There is a strong history of Elon not lying regarding important Tesla messages that he tweets. I have followed most of his tweets for the last few years. If here has been a lying tweet in the past, I am not aware of it. There are indications that what Elon tweeted is really happening given that the board is now publicly stating that they will soon be meeting with banks regarding the possible buyout. Logically, if Elon's tweet did not have a factual basis, with no possible buyout under consideration, the board would likely be taking a different approach. Why would you think there is something else going on? If so, what facts support things not being as they seem?