Seeing talk of a Jefferies upgrade on Twitter: $360 to $450.
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Do you belief in causality? Tell me why the SP jumped $15 BEFORE Elon's tweet.
Thanks.
One thing we haven't discussed recently is the appointment of new board members, this must be due soon, no?
Nothing, This is another B.S. story by Dana Hull. Notice that the story itself doesn't say a 50/50 split cash/shares, that's been added by 3rd parties reporting on her story.
Normally I would agree, because Dana Hull is a known FUDster, but this article is different:
So I think this is 90% certain genuine.
- There are two authors, not just Dana,
- The source is specified as: "Tesla Inc. has notified holders of bonds due in March that if they elect to convert the debt, they’ll be paid with a 50-50 mix of cash and stock, according to a copy of the settlement notice seen by Bloomberg News. The notice, dated Nov. 30, relates to the $920 million convertible bond due at the beginning of March. The equity-conversion price is $359.88 per share, a level Tesla’s stock closed above on Thursday for the first time since Aug. 8."
- This is a strong documentary sosurce, and the "seen by Bloomberg News" wording suggests that Bloomberg editors almost certainly saw the copy of the document. I can say many bad things about Dana Hull's past conduct, but document forgery, if caught, would be career ending - and I don't see her taking that risk.
- The timing is accurate, Tesla had until December 1 to notify note holders about the style of conversion settlement. Note holders have about two months to request share conversion or face value cash conversion (they'll likely wait until the last minute), IIRC.
- 50%/50% cash/stock is a show of cash strength and minimal dilution of 0.7% - and leaves Tesla with up to $460m more cash to expand. Corporate value of Tesla increases by half a billion.
- The article is generally positive, with very little genuine FUD that I can see. It is almost certainly seen as a positive development by the market.
- Tesla declined to comment. Note that Tesla consciously didn't deny the story. In fact if the story was inaccurate Tesla would have every incentive to correct it or at least state that it's inaccurate.
I also expect mainstream business press journalists to become gradually positive towards Tesla now that it's earning money - and this article might be Dana Hull's turning point.
Don’t forget investment into the Tesla Pickup. Successful introduction of the Tesla Pickup will be like launch of the BFR, I mean, Starship now, and will be the death knell of the traditional auto companies in the US.Thats wrong, they are paying cash: 50% cash, 50% stock - and only if the note holders are asking for stock conversion.
This gives Tesla up to $460m more cash to spend on China Gigafactory, the Model Y expansion and the Semi - i.e. faster growth, without new debt.
Model 3 demand is much higher than expected, so investing into growth is a good move - and 50%/50% is a good balance.
The only people who should be unhappy about this are the $TSLA shorts.
Imma take your word for it because you've offered good support for your conclusions. I did read the other author's twitter feed, and she mentions nothing about a 50/50 split, only that there would be some paid in cash, some in shares.
I do not trust D.H. She has demonstrated her willingness to distort circumstances to fit her stories, always in pursuit of creating sensational headlines. I find her irresponsible.
Today, the bears will capitulate. $420 is within spitting distance
It might not imply any dilution. If their hedges took the form of call options (or something equivalent), they can exercise the calls at ~$360 with cash and then deliver the higher valued shares to the bondholders. So to Tesla, it's all cash at $360ish plus some cash they spent to buy the hedge already, but to the bondholders it's half shares. No new shares issued, no dilution. To the hedge writers... well, they got paid already.50%/50% cash/stock is a show of cash strength and minimal dilution of 0.7% - and leaves Tesla with up to $460m more cash to expand. Corporate value of Tesla increases by half a billion.
The short interest is trapped and frozen in the headlights, a disorderly unwind is likely with cascades of margin calls, covering and new momos going long.
OT
Sister company Tesla has a reputation for knowing how to build powerful electric motors. The limiting factor would IMHO be the tolerance of passengers for zero-G on the way down. Kidding aside, I understand that they are repurposing the hole through which the TBM got extracted with an elevator. Cheaper and more throughput would be ramps.
Yes! And add in the 25K car, which Elon said is 4-5 yrs away. Also remember that on Oct 29th Baillie Gifford offered to fund Tesla's development and growth.Don’t forget investment into the Tesla Pickup. Successful introduction of the Tesla Pickup will be like launch of the BFR, I mean, Starship now, and will be the death knell of the traditional auto companies in the US.
It might not imply any dilution. If their hedges took the form of call options (or something equivalent), they can exercise the calls at ~$360 with cash and then deliver the higher valued shares to the bondholders. So to Tesla, it's all cash at $360ish plus some cash they spent to buy the hedge already, but to the bondholders it's half shares. No new shares issued, no dilution. To the hedge writers... well, they got paid already.
I believe the hedges were specified as generating cash. Call options also default to cash settlement.
Under the construct you outline, why would Tesla ever pay the conversions in 50% cash? The hedges cover 100% of the notes, they might as well utilize it - and communicate it well in advance that the conversion is non-dilutive as the shares come from the open market.
Furthermore, Tesla already registered 2.5 million new $TSLA shares back in 2014 when the notes were sold.
So I think the most probable interpretation is that Tesla will use up to 1.2m of those new shares, plus $460m in cash, plus half of the hedge income. Note that they can probably keep the hedge income even if they settle in new shares.
I.e. the hedges will probably generate about $25m of cash for Tesla, for every $10 Tesla exceeds $360 - up to a $560 limit or so, IIRC?
If they settle half in shares then Tesla can keep half of that cash.
If $TSLA reaches about $544 by March then the 50% hedge income will entirely pay for the $460m principal debt (!), AFAICS.
Quite clever, if my interpretation is accurate.
Help me to understand here: does this explain why the Underwriter might be motivated to act to keep the SP under $360?