TSLA Market Action: 2018 Investor Roundtable

[Runarbt]

Ok that means the shorts’ losses are capped since they’ll be able to buy enough from them. It’s actually super bulls with high strike calls that will eat the biggest losses. How about convertible bonds > $420?

Well.. would be stupid of the funds to sell quick.. letthe margin calls come rolling and push the squeeze on.

 

[mongo]

So that's my question: with a short position shorts are owing a near unlimited amount of money. Say if I short 1,000 shares of TSLA at $300 the broker asks me to post collateral of $300,000.

Price spikes up to $1,000 overnight due to shorts trying to cover. Opens at $2,000. Now I owe 1,000 shares of TSLA worth $2,000,000 - I'll rather take the bath and default on the $300,000 worth of collateral.

Now imagine the same scenario with 34 million shares of TSLA short. What is likely to happen?

Yeah, I should have said usually.
Brokers tightened margin requirement before the Q2 report,. They can unilaterally close a position during trading, but none plan for a 10X gap shift.

 

[neroden]

ok, so the blog post answers part of my question (every 6 months), but what's the share price for a private company if I want to sell? Right now it's set by "the market". For a private company it's the Board who offers a price? sorry, brand new territory for me.

I don't know much about it, but I believe it's the Board, *after* consulting with people who want to buy and sell. It can't be *too* far off from the going price because investors are allowed to talk to each other and make private trades, so if the Board's offer is way off from that, people would just do that.

 

[MilosK]

New
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"Enjoy your gains everyone. My broker requires one day between selling and buying with the same funds."

That's due to the settled funds rule, it's an SEC rule, you should have looked it up...

Hmmm ... I thought you could buy with unsettled funds, you just can't then sell before they settle - at least I can on e*trade and just did.

 

[dailo]

just managed to

Hmmm ... I thought you could buy with unsettled funds, you just can't then sell before they settle.

Same here. I do it all the time in my brokerage accounts. I once accidentally sold same day with unsettled funds and got a warning.

 

[mrwuffles]

just managed to

Hmmm ... I thought you could buy with unsettled funds, you just can't then sell before they settle.

Use Robinhood. You can deposit and use their Gold subscription and they'll advance you the funds.

 

[wipster]

So let me ask this question. If, and it's not a little if, the market crashes due to something created by the current administration or a war or something, are we better off having our money invested with a private company or staying public? Or would it make any difference if nobody could afford to buy what Tesla is selling?

Talk amongst yourselves and don't be verklempt...

 

[TradingInvest]

inexperienced hobby trader writing here.

85%+ of float is held by institutions

How are they going to vote for the going-private? Since consensus here seems to be that most of them cannot hold private equity.

Will them selling off their shares soften out the price rise when shares start to cover?

In my view most of them will vote yes and will likely to buy more shares. Elon already confirmed shareholders support this deal. It would be crazy if someone doesn't like it. If someone thinks it worth more, he can simply buy more shares and stay with the private company. If someone thinks it's worth less, he can simply sell his shares.

 

[neroden]

So that's my question: with a short position shorts are owing a near unlimited amount of money. Say if I short 1,000 shares of TSLA at $300 the broker asks me to post collateral of $300,000.

Price spikes up to $1,000 overnight due to shorts trying to cover. Opens at $2,000. Now I owe 1,000 shares of TSLA worth $2,000,000 - I'll rather take the bath and default on the $300,000 worth of collateral.

Ahhhh, but that's not how it works. Have you ever read the agreement you sign when you get a margin account? Specifically regarding short sales?

You as a short-seller can't just default on the collateral. The broker is allowed to go after ALL YOUR ASSETS whether they are at that brokerage or anywhere else! They can clean out any other brokerage accounts you have. They can take your bank accounts, they can take your car, they can take your house, they can take the contents of your house, they can garnish your paycheck. They can repo your TV and sell it. The only escape is bankruptcy!

Margin loans and short-selling are NOT like a "no-recourse" mortgage where you can say "Take the collateral, I'm out of here". They are *recourse* loans, where the broker can take EVERYTHING.

Now imagine the same scenario with 34 million shares of TSLA short. What is likely to happen?

A lot of bankruptcies...

The short-sellers would be well advised to cover IMMEDIATELY. Even if that leaves them having to pay off the debt to the broker over the course of years, at least the debt will have a finite value, rather than spiralling ever upwards.

 

[uselesslogin]

New
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"Enjoy your gains everyone. My broker requires one day between selling and buying with the same funds."

Hmmm ... I thought you could buy with unsettled funds, you just can't then sell before they settle.

Certainly for me I was dumping any and all options for shares and got lots of notice saying I can't sell (the shares that I'm buying) until the funds used to buy them settle. But it let me buy them fine.

 

[Remus]

Is everyone buying at the open if its less then 420??

I am not. I bought some right after the tweet, no money left.

 

[oneday]

You could sell them at their market rate, too, to other people buying them. Just one option to consider.

Except, NOW, I want to own all the shares. Just need an easy peasy half mil. We’re not talking 70billion or anything. Using calls has been my way to add shares. Now that this will likely end, I want to excercise all of my ITM calls. A few thousand shares of $TSLA/P sounds like it could be pretty nice for my kids. Especially since Elon said they would probably go back to public shares again in the future.

At the same time, I am not complaining. Trading account went up 42% today! Wahoo. Just looking into the future it seems it would probably prudent to excercise every call Option I own before TSLA goes private.

 

[Johan]

So let me ask this question. If, and it's not a little if, the market crashes due to something created by the current administration or a war or something, are we better off having our money invested with a private company or staying public? Or would it make any difference if nobody could afford to buy what Tesla is selling?

Talk amongst yourselves and don't be verklempt...

Unless we're talking World War 3 or the Zombie Apocalypse scenario (in which case most investments could become pretty worthless) I'd say you're much better off having your money in a privately held company, for exactly all the reasons Elon described in his internal blog post. But that kind of investment will definitely need to have a much longer time horizon.

 

[neroden]

Anyone have any insights if the large fund holders in Tesla are allowed to keep their stake after the company goes private?

Bailie Gifford is allowed to. Baron is allowed to. Fidelity per se is allowed to but I think a bunch of their mutual funds which actually hold the shares are *not* allowed to; I think something similar is true of T Rowe Price. Tencent obvously can. (The Saudis are allowed to!) Vanguard definitely can't, since it's all index funds. PowerShares QQQ can't. I think Harbor Capital Appreciation can but I don't know for sure.

 

[Moderatefan]

inexperienced hobby trader writing here.

85%+ of float is held by institutions

How are they going to vote for the going-private? Since consensus here seems to be that most of them cannot hold private equity.

Will them selling off their shares soften out the price rise when shares start to cover?

I was thinking the same thing...

They were just talking about this on CNBC. Apparently mutual funds cannot be in private funds.

Huge spike over 400 tomorrow in my opinion. And that's without even considering the short covering.. what are they to do?

If there are a lot of shares in mutual funds, well partial owners can't vote on TSLA and some participants may want liquidity over anything else, so funds cannot lock in peoples money in private... I'm not sure they'd try to sell, seems an easier option just to wait until $420 and get money from Tesla, but if funds do sell, there may be plenty of shares for shorters to cover.
Today's action after re-opening is baffling... either people don't believe Musk or think $380 now is better than $420 ~6 months from now.
Btw, todays volume is like the whole short interest.

 

[Tslynk67]

Anyone wants to take a stab at estimating how high the stock price could go to as a result of mandatory short covering?

I guess if it's margin calls then it could squeeze like any other, but the big players can probably just wait and cover on $420 - a massive loss for them, of course, but not like it would have been.

 

[neroden]

They were just talking about this on CNBC. Apparently mutual funds cannot be in private funds.

This is correct. Operations like Bailie Gifford or Ron Baron are verging on hedge funds, however; mutual funds can always reorganize. Given Ron Baron's attitude, I am *sure* Musk has found a way to make sure his fundholders can stay in Tesla.

 

[Jayjs20]

So, why not just buy ALL the call options with break even point under 420? Wouldn't that make the most sense?

 

[dailo]

The great thing about this thread is that has made me completely forgot about where my Model 3 order is. Forgot to refresh my order page all day.

 

[neroden]

Ok, what is happening? I am new to all this and night things seem to be happening VERY quickly. I get that Elon is talking about taking the company private. What exactly does that mean for us little guys and why is it impacting the stock so strongly?

He's proposing to delist the stock from public markets, making it into a privately held company, and offer anyone who wants to sell their stock $420/share. (He apparently has a consortium of buyers ready to make that offer.) If you keep your stock when it goes private, it will only be possible to sell it intermittently at prices determined by either the Board or other private investors who you talk to.