TSLA Market Action: 2018 Investor Roundtable

[Ratanpara]

Evidence of excellent Q3 are there, but sometimes market stay dumb for a while.

Bloomberg tracker showing 6 K production, even if it is less around 5 K it’s still good.
Model 3 ASP close to 59 K
Street expectations is very reasonable 55 K Model 3 production with delivery higher but to me street expectations for delivery seems like 55 K, with current revenue estimates.

30% reduction in labor hours.

Elon hinting with cryptography message on Twitter with black and white emojis, Implying Tesla is in black now.

As lower trim M3 rolls in along with high production and opening overseas market with higher trim M3 will stabilize ASP with good margin.

 

[mershaw2001]

No, for every short share, there are two long shares, the original holder and the one the short sold to.

There are not two shares. There is one place holder by the lender. There is one short seller who has to fulfill that placeholder by eventually returning the share. And the share is sold to a new long.
I think you may have meant that there are two parties in this equation who have an interest in holding a share, but that is different from two shares existing for the purposes of calculating how much a buyout needs.
For the purposes of buying out the company, whoever is making a bid on the company does not have to pay out 420 to both of those long positions. One of those long positions must be satisfied by the short seller.

 

[Johan]

There are not two shares. There is one place holder by the lender. There is one short seller who has to fulfill that placeholder by eventually returning the share. And the share is sold to a new long.
I think you may have meant that there are two parties in this equation who have an interest in holding a share, but that is different from two shares existing for the purposes of calculating how much a buyout needs.
For the purposes of buying out the company, whoever is making a bid on the company does not have to pay out 420 to both of those long positions. One of those long positions must be satisfied by the short seller.

In a sense you're both right. After the short sale occurs of course a new share isn't created out of thin air, BUT the investor who the short sold to is just as much a holder of a valid share as the one the short borrowed from. So in one sense a long position was created by the short sale. And this dynamic of course is what could cause the squeeze phenomenon.

 

[mershaw2001]

In a sense you're both right. After the short sale occurs of course a new share isn't created out of thin air, BUT the investor who the short sold to is just as much a holder of a valid share as the one the short borrowed from. So in one sense a long position was created by the short sale. And this dynamic of course is what could cause the squeeze phenomenon.

I think that i agree with you and GGR.

The gist of what I was getting at in the original post was that a long position created by a short sale does not have to be paid out when Tsla is bought out. Thus the author of the article was incorrect in his calculation that 24 billion was needed to buyout tesla.

After GGR's comment, I added edited the following in my post:
"They neglected to subtract out the shares that are held by people who bought from short sellers"

 

[TintDepot.com]

Wow this video is huge. Looking at the reports, I am wondering if the SEC shouldn't go after UBS/Colin Langan. Misleading investors is securities fraud.
At best Colin's analyses are not competent at worst malevolent.

Great informative video. Shame on the so called "financial" news outlets (CNBC & WSJ) that didn't due basic math.

 

[Johan]

The gist of what I was getting at in the original post was that a long position created by a short sale does not have to be paid out when Tsla is bought out.

I don't understand this quote. I own xxx number of shares. Nowhere does it say on each share if I bought them from someone who sold them short (= opened a short position) or if I bought them from someone exiting a regular long position. I just own the same number of shares.

Do you mean that somehow someone would be able to say, on the day of the de-listing/buy-out; "No, we won't pay you $420 for that particular share because it turns out you bought it from someone who opened a short position by selling it to you" or "No, that share can't be converted in to a TSLAP share because it's not a "proper" share - it was bought from a short"? That makes no sense to me, but maybe I'm just being thick?

 

[Foghat]

It is interesting to see some shorts argue autopilot team turnover as a negative.

Tesla Director Of AI Discusses Programming A Neural Net For Autopilot (Video) | CleanTechnica

However, from this article (video imbedded), one may find Tesla is rapidly expanding its software system to “2.0” which is nearly all deep neural network now as opposed to traditional “1.0” programming. The mix of 1.0 and 2.0 is becoming far more 2.0 as time moves forward. Therefore, 1.0 would play less of a leading role.

It is interesting how this is not more explored, as Tesla is in the process of establishing one of the most cutting edge, advanced neural network which will essentially write its own software and the most significant job of Tesla programmers is labeling data.

Since gradient descent is essentially derivative calculus, could “snap, crackle, and pop” tweet have anything to do with higher order operations within the neural network? Just curious if even to go there in looking into further

 

[mershaw2001]

I don't understand this quote. I own xxx number of shares. Nowhere does it say on each share if I bought them from someone who sold them short (= opened a short position) or if I bought them from someone exiting a regular long position. I just own the same number of shares.

Yeah I agree with what you said, if you own a share you cannot tell if it was bought from a long exiting or a short seller. But once you own a share, you can lend it out to someone. Thus you become a "long" who essentially doesn't have a share. For this population of people who lend them out to a short seller (such as in a Fully Paid Lending program) they are a long who has a "placeholder" but they do not have possession of a share. When Elon says "2/3 of current shareholders will want to stay in the company" they are counted because they will want to own a share of the private tesla company.

Do you mean that somehow someone would be able to say, on the day of the de-listing/buy-out; "No, we won't pay you $420 for that particular share because it turns out you bought it from someone who opened a short position by selling it to you" or "No, that share can't be converted in to a TSLAP share because it's not a "proper" share - it was bought from a short"? That makes no sense to me, but maybe I'm just being thick?

In essence yes -not for you, but for those people who have lent their shares and only have a placeholder. Those people who have a placeholder above will not be paid out. Thus they must recall their shares from the short seller.

I think a better way to look at it is as follows:

Tesla has ~180 million shares outstanding. 33 million shares are sold short, so in total there are 180+33= 213 million shareholders.

When elon says "2/3 of the shareholders will opt to keep their shares" that means 213*2/3 = 142 million shareholders will opt to keep their shares. If the stock had no shortsellers this would have been 180*2/3= 120 million shareholders that would have opted to keep their shares.

The company has to pay out 420 for each share not kept, so 180-142= 38 million shares, for a total of 38million*420= $15 Billion. This is substantially lower than the $24 billion cited in the article, and it's because there are many shareholders who have bought from short sellers.

I should mention that this was pointed out in one of the mini threads though I can't recall which one.

 

[Menifeer]

I don't understand this quote. I own xxx number of shares. Nowhere does it say on each share if I bought them from someone who sold them short (= opened a short position) or if I bought them from someone exiting a regular long position. I just own the same number of shares.

Do you mean that somehow someone would be able to say, on the day of the de-listing/buy-out; "No, we won't pay you $420 for that particular share because it turns out you bought it from someone who opened a short position by selling it to you" or "No, that share can't be converted in to a TSLAP share because it's not a "proper" share - it was bought from a short"? That makes no sense to me, but maybe I'm just being thick?

Not to worry...

Your broker lent the shares from its pool of shares. You are still credited as being the owner. The broker is on the hook to retrieve the shares from the entity that borrowed them. Sleep soundly.

 

[tander]

Curious if anyone is familiar with the going private mechanics? Is it CEO puts together deal to submit to board, board votes whether to put it to all shareholder vote, all shareholders vote? Is that right or can the board just vote it without a large shareholder vote? Is the original submission public or is that only if they put it to a shareholder vote? If all the major shareholders (a majority of shares) have already agreed to the plan before being submitted to the board, is a shareholder vote even required?

Here's the Dell timelinehttps://www.reuters.com/article/us-dell-buyout-timeline/timeline-the-long-path-to-a-dell-buyout-idUSBRE92T00X20130330
Dell-EMC: A Timeline Of A $67 Billion Deal

 

[bird2730]

Not to worry...

Your broker lent the shares from its pool of shares. You are still credited as being the owner. The broker is on the hook to retrieve the shares from the entity that borrowed them. Sleep soundly.

I saw this being circulated on some of the FB groups, is there validity to it that anyone can confirm? Preventing your Shares Holdings from being Shorted
I have never gotten confirmation (even my broker was not sure), but I have put 1500-2000$ sell orders on all my shares just in case (also if there is a massive short squeeze)
If you are too lazy to read it, basically if you put a sell order then your broker can't lend them out.

 

[mershaw2001]

I saw this being circulated on some of the FB groups, is there validity to it that anyone can confirm? Preventing your Shares Holdings from being Shorted
I have never gotten confirmation (even my broker was not sure), but I have put 1500-2000$ sell orders on all my shares just in case (also if there is a massive short squeeze)
If you are too lazy to read it, basically if you put a sell order then your broker can't lend them out.

We have had this come up a few times, might work at some brokerages but def not at fidelity. If you are in a margin account and have no debit, they won't be lent out. If you have a cash covered account, they won't be lent out unless you agree to it. If you have a margin account and a margin balance your shares will be lent out and you won't know.

 

[Marsnaut]

I saw this being circulated on some of the FB groups, is there validity to it that anyone can confirm? Preventing your Shares Holdings from being Shorted
I have never gotten confirmation (even my broker was not sure), but I have put 1500-2000$ sell orders on all my shares just in case (also if there is a massive short squeeze)
If you are too lazy to read it, basically if you put a sell order then your broker can't lend them out.

Honestly, it doesn't matter as much as people think besides the principle of it.

Short term borrow rates are pretty low on TSLA (though it does spike every so often). Mutual funds don't care and will allow their shares to be rehypothecated in most cases. If you use Interactive Brokers or Fidelity, you at least get paid for it. I participate in the Stock Yield Enhancement Program at IB and they rarely lend out even a quarter of my shares meaning that there are more than enough shares to sell short.

 

[madodel]

I saw this being circulated on some of the FB groups, is there validity to it that anyone can confirm? Preventing your Shares Holdings from being Shorted
I have never gotten confirmation (even my broker was not sure), but I have put 1500-2000$ sell orders on all my shares just in case (also if there is a massive short squeeze)
If you are too lazy to read it, basically if you put a sell order then your broker can't lend them out.

My understanding and what Fidelity told me is that they would only loan out shares that are in margined accounts or that the owner signed an agreement to allow loaning out shares. So if you have a normal brokerage account with no margin and never signed an agreement to loan them out your shares are not affected.

 

[MXWing]

Here's a theory:

Tesla hits positive FCF in Q3 when they are not in a huge rush to make deliveries end of September. If you hit your goal, why not top Q3 in Q4?

 

[Cosmacelf]

So is anyone in this thread actually making interest money on having their shares loaned out to shorts?

 

[Zhelko Dimic]

Yeah, I believe it's randomly assigned by the OCC.

I bought back way earlier today and the scenario above is essentially what played out. Which is why I'm confused... pretty much the only drawback of covered calls is that you give up potential profit. But to me, it appears that if you buy back near expiration, the stock to option parity is pretty much 1:1 which means buying back if it is ITM is the best option (and never getting assigned).

You could sell option for $2, price shoots up, you buy it back for $50, and over the weekend bad news comes and stock drops $50 to where it was. You lose $48 to collect sure $0.16.
Or you may buy it back and lose $48-$0.16, and sell another covered call next week to recover, and you may lose another $48. Of course, if price persists, you didn't really lose anything, but potential profits

Chances of these edge cases are small. So it's a safe game, just like picking up pennies in front of the steamroller...

If you search through my history for NFLX or FB or AMZN, you're likely to find story repeated couple of times how covered calls screwed me. But hey...

 

[Zhelko Dimic]

I don't understand this quote. I own xxx number of shares. Nowhere does it say on each share if I bought them from someone who sold them short (= opened a short position) or if I bought them from someone exiting a regular long position. I just own the same number of shares.

Do you mean that somehow someone would be able to say, on the day of the de-listing/buy-out; "No, we won't pay you $420 for that particular share because it turns out you bought it from someone who opened a short position by selling it to you" or "No, that share can't be converted in to a TSLAP share because it's not a "proper" share - it was bought from a short"? That makes no sense to me, but maybe I'm just being thick?

You're right, OP is wrong.
There are 3 entities; 2 hold (+1) share, one holds (-1) share

(1)+(1)+ (-1)=1
1 share issued, yet, 2 long holders
short has obligation to make one long holder whole at the threat of bankruptcy, wage garnishing etc...
if he fails, other mechanisms kick in. this has been discussed many times too...

 

[Sudre]

Tesla has ~180 million shares outstanding. 33 million shares are sold short, so in total there are 180+33= 213 million shareholders.

When elon says "2/3 of the shareholders will opt to keep their shares" that means 213*2/3 = 142 million shareholders will opt to keep their shares. If the stock had no shortsellers this would have been 180*2/3= 120 million shareholders that would have opted to keep their shares.

I find one thing interesting.
180M actual share in TSLA.
142M shares to be held into private.
That leaves 38M shares in limbo so plenty for the 33M shorts to cover with...... as long as they don't start shorting more AND no one else starts acquiring shares at these low prices who wish to remain in TSLAP.

FYI I have added 1/3 more to my position at these low prices so far to be held into TSLAP.
I hope for the shorts no one else is doing this. (not)

 

[Marsnaut]

So is anyone in this thread actually making interest money on having their shares loaned out to shorts?

I am. Since IB lends out a proportion of how many shares are eligible to be shorted, I can calculate real-time availability by percent. Since 10% of my shares are being lent out, it means 90% of all eligible shares have not been lent out.

For example if 1 million shareholders (with 1 share each) allowed their shares to be shorted, only 100,000 shares have been shorted indicating that there is "high" availability of shares to short.

IB receives ~1.4% of the collateral value, and they give me half at 0.7%. As the stock becomes harder to borrow, the rate they collect and the rate I collect increases. It is an annualized rate but interest is calculated daily.