TSLA Market Action: 2018 Investor Roundtable

[lklundin]

when Wall Street get involved, they always act on stock before information become public

Excuse me for possibly being naive, but what is left for "Wall Street" to trade on between insider trading and trading on public information?

If this set is non-empty (or illegal but never prosecuted), then I understand very well why said "Wall Street" are so upset with Elon Musk making his announcements on Twitter.

"Bad Elon Musk, he is taking away our Free Money, that we steal from clueless Retail Investors!"

 

[lklundin]

Today's volume was really low. There were minutes with less transactions than 5.

Low volume means even single retail transaction could move price up/down.

On a related note, on the morning after the 420 tweet I was so intent on getting in, that I placed a buy order (of 75 shares) during the pre-market session (which I usually stay away from). Filling this tiny order moved the SP up 4€ (for my last 5 shares)...

 

[Ellec]

You're talking about a possibility (Tesla privatizing), and one that's months away (would guess half a year). In the mean time, the stock keeps being traded. And buying at a point in time when short interest is low poses the very risk that short interest will rise again (always does with Tesla) and lower the stock value, rendering your buy at the higher price a waste of money.

Volatility is not going to just vanish for the next six months. Assuming the deal actually even goes through.

I have a buy set for $339, but I'm thinking about lowering it to $329, given the low short interest at present and the possible price reduction if it rises.



The price does not go sideways when short interest rises; it goes down.

The issue for shorts is time is running out. Tesla will file their Q3 production and deliveries around 7 weeks. All eyes will be on Model 3 deliveries. If this is above 50k then it should be straightforward to project profitability and positive cashflow for Q3

50k * 60k (ASP) = 3 billion
55k * 60k (ASP) = 3.3 billion
60k * 60k (ASP) = 3.6 billion

 

[KarenRei]

The issue for shorts is time is running out. Tesla will file their Q3 production and deliveries around 7 weeks. All eyes will be on Model 3 deliveries. If this is above 50k then it should be straightforward to project profitability and positive cashflow for Q3

50k * 60k (ASP) = 3 billion
55k * 60k (ASP) = 3.3 billion
60k * 60k (ASP) = 3.6 billion

Agreed. Same trading dynamics as we were pre-announcement. It's not a Brave New World; it's "Tesla's March To Profitability, Part Deux"

But I think we still have plenty of short fun lined up in Q3 and Q4 They'll say "Q3 was a fluke, rigged for a one-time profit by "total fraud" huckster Elon", and hang in for Q4.

And I'm honestly quite happy with that concept I like the volatility. Just have to be smart about buy and sell points, which means properly evaluating where in the ups and downs we are. I worry about people who see the current situation as just "up, up, up" because of the buyout notion.

 

[neroden]

Here's my bonehead question: are you exited to have Goldman Sachs with a price target of 195 USD on board?

GS has a long history of putting low price targets on stock which the "other half" of the company is buying up (and vice versa, of putting high price targets on stock which the "other half" of the company is selling).

 

[neroden]

I don't know if it's true, single source so far, and can't find it at the Reutors, which supposedly produced this info. However, it got picked by Yahoo finance, so it's likely to create some confusion today, even if it's not true:
Silver Lake Denies Talking to Tesla: Reuters

So this claim is supposedly from Reuters but this claim isn't in the Reuters article? That's disinformation of the most obvious sort...

Reuters was claiming that their "source" said that the Saudis were definitely not interested, so they have a clearly-bad source anyway...

 

[neroden]

How could it be possible to hold shares in an IRA if it goes private? I didn't think that's the way IRAs worked; that it can't be private?

See "Self Directed IRA discussion" elsewhere in this forum

 

[neroden]

IIRC, GS Bank has been one of the counter-parties on all the convertible note hedges. Counter-parties are exposed above $327.50 on the 2022 notes and above $359.87 on the 2019/2021 notes.

Helpful information.

 

[neroden]

He paid back all draws against GS Bank's personal line of credit several years ago (IIRC, the pay back was mentioned in the 2016 annual meeting proxy--an appreciable percentage of those prior draws funded purchases of additional shares in follow-on offerings in which GS Investment Banking entity acted as lead underwriter).

MS Bank appears as the only disclosed creditor on Elon's personal line in more recent proxies. 13,774,897 shares pledged as of 12/31/17.

Even more helpful

 

[neroden]

As I recall it doesn't need 70B but more likely no more tha 30B.

Maximum needed for a buyout at $420 is
(170 million shares outstanding - 34 million held by Musk) * $420 = $57.12 billion
If ANY other shareholders stay it needs less than that. So second guess for the maximum:
(170 million shares outstanding - 34 million held by Musk - 8 million held by Tencent) * $420 = $53.76 billion

I think it's pretty obvious far more investors than that will stay in. 70B is a fictional number made up by short-sellers.

We don't know how many shares the Saudis already have, but let's go with the 3% figure, which would be 5 milion:
(170 million shares outstanding - 34 million held by Musk - 8 million held by Tencent - 5 million held by Saudis) * $420 = $51.66 billion

Because of the 34 million shares fabricated by short-sellers, there are 204 million shares held long. If you exclude the Musk, Tencent, and (low estimate) Saudi holdings, you find 157 million shares held long by other people. If only 21.6% of those holders sell, their shares will be bought by the short-sellers covering and it won't actually cost anything to go private! If more sell, then it will cost something to go private. The question is what percentage of those holders will actually sell. This is rather hard to figure.

 

[neroden]

This "all in" long is going to sell a few thousand shares due to a margin call. That's how it works when the price is held down $20 below where you bought as much as possible.

Margin Is Dangerous

 

[neroden]

As usual with press reports these days, lots of rumor and innuendo. However, this excerpt from that article also caught my eye:



If Silver Lake is going to pull together a detailed go private plan FOR FREE, they are only doing it to be able to participate AND everyone involved is going to make sure it happens...

Oh my God. If that article is correct (and who knows?) then yeah, this is definitely happening, and Silver Lake is going to put in huge amounts of money.

 

[neroden]

It's not just the human rights thing. The Norwegian governance is so much better and stable. It is subject to democratic review under mature state institutions. Compare to SA where a few inner cronies can decide on a whim to jail half of the elites in 5 star resorts to settle some opaque vendetta.

Yeah, this particular incident is why I said Musk should never visit Saudi Arabia.

 

[gringotuanis]

So tempting to sell 1/2 of my position. Greed is telling me to hold. Normally never work for me. I don't know what to do.

For those who sell, maybe. For those who hold (and/or accumulate), no.
I'm glad I've been informed of the discussions at the same time as the big shareholders. Why keep this a secret? What's the point of being a public company if small shareholders as not informed like any other?

The only thing I would have done differently, is say
- funding is not a problem (instead of "secured")
- one reason why this is not certain is that it’s contingent on a shareholder vote (instead of "only reason").

That's it.

I think he should have just not mentioned funding. "Thinking of taking Tesla private and in negotiations with investors" would have given the same result ( we would all know he's considering going private) without all the drama now being created by articles saying he has no funding and potential for an SEC inquiry.

 

[neroden]

All terms of the deal will have to be disclosed (including record dates) prior to any shareholder vote.

Record dates can be, and often are, *in the past* when they're announced.

 

[KarenRei]

Yeah, this particular incident is why I said Musk should never visit Saudi Arabia.

All political issues of the country aside, the Saudis are rather a pain to work with. My father was once the CEO of a major Saudi-US joint venture, and the Saudis were always the problematic side of the arrangement, trying to micromanage and complaining about everything. I do have concerns that if the Saudis end up with too large of a stake, Elon might be trading one type of hell for another.

That said, their recent cleantech spending is real and not some sort of conspiracy. They know they need to hedge, and are spending a lot of money to do so. And Tesla isn't a dividend-paying stock, so their potential gains won't be until they cash out, presumably well in the future.

 

[MikeQ]

I visited Tesla store today. I noticed great number of M3s in parking lots, and after all discussion re demand, I was a bit concerned. So while kids were playing in an M3, I was chatting with a salesperson and exploring complexities of trying to do convenience trade-in from MS to M3. I slipped into the conversation question, if any of the M3s are available for pickup now. I got firm 'no', and explanation of the timelines. So I pressed, pointing to all M3s on the parking lot, and asking if they had any in the inventory. Sales-guy almost laughed me out of the showroom, and confirmed that all of these are newly arrived, for delivery. He also stated that he personally sold 3 M3s today. That was at about 2:30pm.

Why is this story important, and in this thread?
Well M3 starts at CAD$65K (the same USD $49K version), and salaries around here are pretty much 1:1 CAD for USD, so it's definitely less affordable than in USA.
More importantly, Ontario government just killed $14,000 incentive, less than a month ago. Tesla was delivering like crazy to Toronto in Q2. Hence, I had expected that demand cools off almost to a stall, for at least quarter or two, but that's not the case.

So finally a conclusion: If Tesla can sell M3 in good numbers in Toronto, where it effectively just became $14,000 more expensive, there is no reason to worry about demand. And I know lot of you don't worry, but I like to be careful. This makes me comfortable that no matter what happens with a buyout, we're heading towards $400 in the next few months anyhow. So I stay leveraged.

We took delivery of a Model 3 last Friday for my son and the Orlando, FL store was packed to the gills. I've never been in a car dealership of any kind that was this busy. There was no parking available and lines in the showroom. Also a steady stream of Model 3's entering a leaving the delivery bays.

We've also noticed a huge uptick of Tesla sightings on the road around town. My son counted 7 on a 6.5 mile stretch of road near our house. Oddly, most were not Model 3's. I suspect the ending of the tax credit in the U.S. may be driving some of this.

 

[generalenthu]

I actually do have some concerns about acquiring more at this point. Looking at the decline in short interest, what happens to the value when short interest inevitably shoots back up again?

I'd be worried if the short interest drops a whole lot more. Who will fund the longs who cannot hold TSLAP. Right now, the plan is for them to balance it out, leaving much less in the hands of KSA PIF or even silver lake.

 

[Boomer19]

Oh my God. If that article is correct (and who knows?) then yeah, this is definitely happening, and Silver Lake is going to put in huge amounts of money.

@Cosmacelf which article was that? i must have missed your post.

think i’ve got it
TSLA Market Action: 2018 Investor Roundtable
nyt one

 

[bdy0627]

My guess is we trade sideways between 340-390 until the shareholder vote.

I don't disagree at all with Tesla trading in that range, just not sideways within a really narrow band. I think the floor may be closer to $320 though.