TSLA Market Action: 2018 Investor Roundtable

[LordAstinus]

Chanos on Musk: He's making cars at not enough gross margin:

https://www.cnbc.com/video/2018/06/13/chanos-musk-cars-gross-margin.html

"
- How long can you keep the Tesla short on?
- I think most short positions you can keep on indefinitely. There's no time limit on them. It's just a matter of price and your willingness to hold losses. There's no time frame.
...
- Layoffs
...
"

He concedes that TESLA may be GAAP profitable for 1 quarter, but that it is not sustainable. That's the narrative that other shorts have been building up for the last couple of months. So they are moving the goalposts to buy several months. What intrigues me is how many of them will try to use the time to reduce their losses and how many of them will use it to lose their shirt.

 

[YasB]

To actually effect a short squeeze there has to be a precipitating event along with something that makes stock as scarce as unobtainium. So Elon is making sure that all his shares are loaned out to shorts, the more the better. Then when he announces whatever awesome things he'll announce -- a new gigafactory in China paid for by Tencent and leased to Tesla, 5000+/week Model 3 delivered sustainably, and a huge new energy project -- he'll also recall all his shares. The result will be as you can imagine. The man knows how to play these games.

First of all, i'm not a lawyer and i don't have much experience when it comes to US security laws, but the relevant rules seem to be SEC Rule 10b-5 and SEC Rule 10b5-1. You can find them here: https://www.law.cornell.edu/cfr/text/17/part-240/subpart-A

§ 240.10b-5 Employment of manipulative and deceptive devices.
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

§ 240.10b5-1 Trading “on the basis of” material nonpublic information in insider trading cases.
[...]
(a)General. The “manipulative and deceptive devices” prohibited by Section 10(b) of the Act ( 15 U.S.C. 78j) and § 240.10b-5 thereunder include, among other things, the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information.

If simply recalling shares you've lend out to shorts falls under this rule, i don't know.. That seems to depend a lot on how courts would interprete "directly or indirectly" and "by any means or instrumentality of interstate commerce". Not sure if this includes recalling shares. So maybe Mr. Musk could do that and get away with it. What he almost certainly can't do is, to come out with an awesome new announcement like that Tencent example you wrote about. He has bought shares during the last days, which is an action that's covered by the rules and it's illegal, if he has been withholding any material information. That said, many bulls seem to have a tendency to buy like crazy on completely immaterial information, so he could still pull off something like that. Why not simply reiterate some of the statements they already made in the past? You know stuff like "FSD is right around the corner now" or simply announce the "locations for between two and four Gigafactories later this year – probably four" he teased more than a year ago.

 

[22522]

First of all, i'm not a lawyer and i don't have much experience when it comes to US security laws, but the relevant rules seem to be SEC Rule 10b-5 and SEC Rule 10b5-1. You can find them here: https://www.law.cornell.edu/cfr/text/17/part-240/subpart-A





If simply recalling shares you've lend out to shorts falls under this rule, i don't know.. That seems to depend a lot on how courts would interprete "directly or indirectly" and "by any means or instrumentality of interstate commerce". Not sure if this includes recalling shares. So maybe Mr. Musk could do that and get away with it. What he almost certainly can't do is, to come out with an awesome new announcement like that Tencent example you wrote about. He has bought shares during the last days, which is an action that's covered by the rules and it's illegal, if he has been withholding any material information. That said, many bulls seem to have a tendency to buy like crazy on completely immaterial information, so he could still pull off something like that. Why not simply reiterate some of the statements they already made in the past? You know stuff like "FSD is right around the corner now" or simply announce the "locations for between two and four Gigafactories later this year – probably four" he teased more than a year ago.

Elon releases enough information to where it has been stated that they are trying to build a factory in China. At some time financing will be figured out.

Is Elon frozen out whenever a deal is in the works (announced but not closed)? That could be always.

He announced purchase and price when he bought the stock.

I see “and” between manipulative and deceptive. I don’t see “or.”

Looks clear to me.

 

[j0hn]

pre market has just rose sharply , almost +5 as i write this.

i am wondering if anyone knows this , if short positions are force closed can that happen pre market ?

 

[Dan Detweiler]

Are we going to crack (and stay above) the $350 mark today? $349 and change in early trading so far.

Dan

 

[bdy0627]

Sorry, you'll have to do better than that to support your assertion. Recalling one's shares (meaning making them no longer available to be borrowed by short sellers) doesn't involve trading. If done after the announcements of various sorts are made, then there's no insider information involved. I'm quite sure that Elon wouldn't do anything that isn't scrupulously legal, but people who are counting on regular and normal trading conditions may very well be blind-sided.

So chapter and verse from the actual rules please, preferably with relevant case law. Otherwise I believe you're just as ignorant as I am. While Elon, I am quite sure, has the means and motivation to know exactly what he's allowed to do. And he has the smarts to know how to best use his capabilities to create an epic short squeeze. Remember, while he's often late to deliver, he always delivers what he says he will.

Technically, to recall any loaned shares, Elon would simply need to place a sell order at a stratospheric price, correct? How could that possibly be considered insider trading? Perhaps manipulation? But even that seems a stretch since they are shares he owns and he is not technically even trading them to do so.

 

[Drax7]

Elon has all the insider information.
Withholding VINs and then announcing a 5000 plus sustained rate per week.

Baaah nonsense.

Chanos must be punished for acting in bad faith.
Along with CNBC for their fake narrative and complicity.

 

[HG Wells]

Think of the effect of Elon announcing he has placed a sale order at say $700.

 

[bdy0627]

Think of the effect of Elon announcing he has placed a sale order at say $700.

That is wayyyy too low. $7,000 perhaps?

 

[avoigt]

That is wayyyy too low. $7,000 perhaps?

Elon stated in an interview lately that he would be the last one selling shares. That statement with tears in his eyes has been very credible for me. It would not fit well to his words to put any sell order in and I doubt he will do that even with an unrealistic sell price.

Another thought:

He did execute two large buy orders or better said for us large for him small. The good news here is not only the statement of confidence he I sending but given his statement above this stocks are gone almost forever. Like with all my stocks BTW which I do not intend to sell in the foreseeable future.

It would be interesting to know if this two buy orders are just the beginning of a series that continues. The amount of available shares is shrinking and if he continuous to buy and people anticipate he will not stop it could have a strong effect on other longs until the squeeze is happening.

Lets also not forget that the 10 fold SP increase he is trying to achieve over time will enable him to get to his annual bonus or better said only payment. Elon is not driven by money as we all know but with his share of Tesla increasing he has more control over the destiny of Tesla.

Also that would give him more power for not popular decisions he may want to do. As an example we all remember the big up-cry of the market when he announced the takeover of SolarCity. I found it compelling and it did make sense to me but the market did hate it. In the aftermath people understand better where he is heading to.

As an entrepreneur you need to make sometimes long term not popular decisions in order to position for the long run. Managers and Investors don't like this moves normally as it can have a negative effect on short term profit and dividends. Owners have often a better hand for this and if he continues to get large chunks of shares with buying and stock bonuses he will be more an owner than he is today.

His move to IPO was an attempt to get cash in order to finance the crazy CapEx he needed to make Tesla scale. He does not like the challenges that go along with a public company. Now as they are he cannot and will not go back to the private model but can move in that direction by owning the majority of Tesla.

 

[Tslynk67]

Elon stated in an interview lately that he would be the last one selling shares. That statement with tears in his eyes has been very credible for me. It would not fit well to his words to put any sell order in and I doubt he will do that even with an unrealistic sell price.

Another thought:

He did execute two large buy orders or better said for us large for him small. The good news here is not only the statement of confidence he I sending but given his statement above this stocks are gone almost forever. Like with all my stocks BTW which I do not intend to sell in the foreseeable future.

It would be interesting to know if this two buy orders are just the beginning of a series that continues. The amount of available shares is shrinking and if he continuous to buy and people anticipate he will not stop it could have a strong effect on other longs until the squeeze is happening.

Lets also not forget that the 10 fold SP increase he is trying to achieve over time will enable him to get to his annual bonus or better said only payment. Elon is not driven by money as we all know but with his share of Tesla increasing he has more control over the destiny of Tesla.

Also that would give him more power for not popular decisions he may want to do. As an example we all remember the big up-cry of the market when he announced the takeover of SolarCity. I found it compelling and it did make sense to me but the market did hate it. In the aftermath people understand better where he is heading to.

As an entrepreneur you need to make sometimes long term not popular decisions in order to position for the long run. Managers and Investors don't like this moves normally as it can have a negative effect on short term profit and dividends. Owners have often a better hand for this and if he continues to get large chunks of shares with buying and stock bonuses he will be more an owner than he is today.

His move to IPO was an attempt to get cash in order to finance the crazy CapEx he needed to make Tesla scale. He does not like the challenges that go along with a public company. Now as they are he cannot and will not go back to the private model but can move in that direction by owning the majority of Tesla.

He can buy mine today for 10x the current SP, if he wants...

 

[JRP3]

He can buy mine today for 10x the current SP, if he wants...

Another weak long

 

[jeewee3000]

Option_Sniper on Twitter

His theory is that TSLA has to break 352 to show strength today. I got some short term calls riding on this so I'll be eagle-eyed to see if I should jump ship or not.

 

[ValueAnalyst]

Another weak long

There's a grain of truth in every joke.

As for me, I'm holding onto my shares, unless the "short burn of the century" decouples the stock from fundamentals, which I estimate amount to an intrinsic value of $1,000 per share. This estimate is based on a multi-year discounted cash flow analysis, and it may change in either direction as the future unfolds.

If the stock approaches my estimate of intrinsic value sooner rather than later, then I will revisit my assumptions and the corresponding facts. This is somewhat of an ongoing process anyway, but at this time, I'm spending more time enjoying the show with my popcorn rather than fine-tuning my assumptions, because TSLA is deeply underpriced.

https://twitter.com/ValueAnalyst1/status/1007220936725102592

 

[bdy0627]

Option_Sniper on Twitter

His theory is that TSLA has to break 352 to show strength today. I got some short term calls riding on this so I'll be eagle-eyed to see if I should jump ship or not.

He mentions it will fade big if it doesn't take $352. I have a difficult time seeing it fade big right now, given the support we continue to see. Of course, fade big for a day trader may mean $330s.

 

[Paracelsus]

There's a grain of truth in every joke.

As for me, I'm holding onto my shares, unless the "short burn of the century" decouples the stock from fundamentals, which I estimate amount to an intrinsic value of $1,000 per share. This estimate is based on a multi-year discounted cash flow analysis, and it may change in either direction as the future unfolds.

If the stock approaches my estimate of intrinsic value sooner rather than later, then I will revisit my assumptions and the corresponding facts. This is somewhat of an ongoing process anyway, but at this time, I'm spending more time enjoying the show with my popcorn rather than fine-tuning my assumptions, because TSLA is deeply underpriced.

https://twitter.com/ValueAnalyst1/status/1007220936725102592

@ValueAnalyst - when I saw that Elon was buying shares I had to wonder if this effort was aligned with your theme of reducing the float since Elon 'is' Tesla in so many ways You had recently mentioned this again on the Blind Faith Price Target forum. Do you see this as a share buyback effort? Thanks in advance!

 

[Rarity]

Keep in mind that with the accelerated vesting for departing employees, more float is being added meanwhile.

 

[ggr]

Can I just point out that Elon's purchase was less than 1% of the day's volume? Sure, it's big, but it isn't going to move the market nearly as much as people seem to be thinking.

 

[jeewee3000]

The purchase itself won't, but the implications of it might.

 

[Paracelsus]

Can I just point out that Elon's purchase was less than 1% of the day's volume? Sure, it's big, but it isn't going to move the market nearly as much as people seem to be thinking.

Yes, while it is only 1% of the daily volume of total shares traded, isn't it a much, much larger portion of shares that are bought and held long each day? I certainly don't claim to understand the process, but it has been often discussed that most of the ~7 million shares/day are little more than MM's moving price up and down the board.

It would be interesting to follow up on the concept @Rarity just mentioned regarding 'new float shares' from accelerating vesting of departing employees - i.e. how many shares did that equal and how many shares has Elon purchased. Perhaps he simply didn't want the float to grow any larger...........?