TSLA Market Action: 2018 Investor Roundtable

[ZachShahan]

Disagree. I've seen private buyout offers fail because the stock price shot above the buyout price... people were happy to hold shares.

I'm not so silently praying for this.

 

[neroden]

I have been wondering about this. And trying to plan a strategy. I know it is definitely still too early to really plan anything since we are lacking so many details. But I have been trying to run a few hypotheticals.

I would like to take advantage of the short squeeze but not miss out on my chance to retain ownership of TSLA/P. If the price runs up due to a squeeze, I’d assume before the closing and execution of the LBO (or whatever it should be called, private buy out?) the price would want to fall back to the target price of the buy out (420?). So in this scenario, I would sell my shares during the squeeze and rebuy them before the buy out, as close to the deadline as possible to take advantage of the market trying to regain equilibrium. In this scenario though, I am sure others would do the same. So this could force the market to actually price the desire to own TSLA/P higher than the target acquisition price. I could imagine a scenario where the price doesn’t actually come back to $420. If this is indeed possible and not a violation of the covenants of said buy out, it could also be possible to sell trying to take advantage of the squeeze and actually still have to buy back in at a higher price.

Is this possible?

IIRC, Whole Foods was trading higher than the buyout price immediately before it was in fact bought out for cash. In this case it's even more likely...

Anybody else thought about these kind of scenarios?

Tl;dr: Is it possible that the SP sits above the $420 acquisition price at execution of buy out, because demand is high enough for ownership of TSLA/P?

... because yes, it's possible that the demand for private Tesla stock is high enough to hold the price above $420. This is legal, but anyone who was *forced* to sell due to fund management rules or being too foreign or not "qualified" enough would probably sue to get a higher price, so if the price stabilized above $420, I would *really really really* expect the buyout offer to be raised.

And also not violate covenants of the buy out?
Could the shareholder vote be $420 not dependent on current SP?

Yes, it might not be dependent on current stock price. And if the current price was $420.01, I doubt they'd change the offer.

 

[MXWing]

This is FUD. Your denial is strong. You think we're all idiots for believing that the offer is true?

The old poker saying is "Look around the table for the mark. If you can't spot him, it's you." In your case, I'd paraphrase: "Look around the forum for the seasoned investors who are about to lose everything. If you think it's all of them, it's you."

The term is ‘patsy’.

 

[Robertj]

You call that a squeeze?

Your comment is funny , but not for my March 500 calls

 

[dmckinstry]

Now that I've finished reading over 650 posts in this forum I have a few comments/questions.
1) Can we longs that want to convert much or all of our common shares to private shares to send a group letter to Elon thanking him for for giving us that opportunity?
2) I have about 39% of my shares in TDAmeritrade, about 33% my ROTH IRA within my self-directed account in TIAA, and the rest in my Traditional IRA in that self-directed TIAA account. I'm (for now) reasonably sure that the first account can be converted, but I'll have to check with TIAA tomorrow to find out about those accounts. Also I have to be able to sell some of my shares every year to cover minimum distribution. And and any of you that say I can find ways around that, you obviously have more available cash than I have.
3) At some point I want to sell enough shares to pay for the Model X I want to buy. But I still want to have a significant fraction of my holdings in stock.

 

[hacer]

It just happens to be where the largest profit is if this strategy works.

For example:
For target 320, the premium is 94.13, so 42000 - 32000 - 9413 = 587 per call option, so the profit per call option isn't as big
If you do 350, the premium is 74.98, so 42000 - 35000 - 7498 = -6972 per call option, so you'd actually lose money

Based on the current option prices, there's a bell curve that tops off around target price 210 for me

I've attached what I have on my excel sheet to show what I'm talking about.

The trouble is that those quotes may have no relation to the quotes at the opening rotation tomorrow.

 

[EinSV]

How does this work with the fund for common stakeholders to get converted into? You make it sound like you can only ever sell, never buy. Is that correct?

@KarenRei I tried to buy SpaceX stock earlier this year through Equidate, a platform that allows buying privately held shares, but it was a total bust. My understanding is that SpaceX has a right of first refusal on privately owned shares that otherwise would be sold to the public and that as a result SpaceX shares are rarely if ever available for purchase.

My expectation is that the same will be true for Tesla although that is just a guess at this point since we don't have details yet.

If there are others with more experience/knowledge re SpaceX shares hopefully they can weigh in.

 

[Unpilot]

I step away from the screen....and get auto signed out....read a few pages without knowing I am not signed in...and run into the bird flinging FUD.

All I can say is wow denial is strong in that one.

 

[neroden]

You bring a good point- if Q3 is good, the SP will climb. Then $420 does seem low. Does it mean that voting and going private should go super fast to prevent a higher buy out price?

Yep.

I don't think they can actually pull it off that fast, since this is an unusual deal structure (with *all* stockholders apparently having the option to go private with Musk?) and it requires approval from each series of convertible bondholders as well as the stockholders, and the SEC filings haven't even happened yet. And then there's the Hart-Scott-Rodino waiting period.

This is a bit awkward, cause we'll be committing to a sight unseen with the shares... same as buying M3 w/o test driving it - going private w/o seeing any earnings

I genuinely don't think they can pull it off that fast, though they may try. If they do try, I will vote "no" because they will be trying to grab the stock cheap before everyone notices how much it's worth. If it takes longer, there is a serious chance of the deal ending due to the stock price skyrocketing. Which is fine.

And if we go through the Q3 numbers (and maybe even the Q4 numbers, given how complicated this deal looks) and the stock doesn't skyrocket over the tender offer, well, then that does prove that Tesla should go private.

 

[Vinny809]

What does this mean for call option holders with strike prices below $420? How will you play it?

 

[anticitizen13.7]

I called Fidelity today and they say it is a private equity fund that is not owned/run by Fidelity and Fidelity can not sell it. They said they have been getting calls all day about it since Elon mentioned it. So does anyone know anything about this SpaceX equity fund? According to Elon it only has a liquidity window every 6 months to buy/sell. But buy from who?

Ashlee Vance's biography of Elon Musk has a copy of an email in Appendix 3, on page 377, regarding SpaceX stock. The email is dated June 7, 2013, with subject "Going Public".

In this email, Musk discusses his negative experiences in managing Tesla and SolarCity as public companies. He says that SpaceX employees who want to sell SpaceX stock, should do so at "our roughly biannual liquidity events" after holding the stock for a year or more. This implies to me that the SpaceX equity fund is owned by SpaceX, but my guess is that this fund is administered by an outside financial services firm (perhaps whoever is responsible for their 401(k) plans).

 

[neroden]

I know a little about this since I was offered a job at SpaceX once upon a time. Basically every six months an independent auditor values the company and the board then approves a "liquidity event" in which the company offers to buy back stock at the appropriate price. I'm not sure if other stockholders get to ask to buy some of that stock, but I don't think so, I think it just goes back into the company like a repurchase in a public company.

Since SpaceX still needs funding, there's got to be some way in which other stockholders get to buy new stock. And I specifically have heard of people increasing their SpaceX stock position on occasion, within the last few years. They aren't really in a sufficiently cash-gushing position to just continuously do buybacks, are they? So I suspect there is some way for existing stockholders to register to say "Yeah, I'll buy anything that other stockholders want to sell". But I'd love to have more information.

 

[EinSV]

It’s fud because it’s tilted towards the assumption of a lie.

If our news cycle was full of all the repercussions of false statements that’s all news would be. “GM today announces the manufacture of 13,000 vehicles...Great point Suzy, if that number is off you know the CEO is in for some prison time” said no reporter ever. Yet here we are.

Every company is bound when they make statements like this, why “are you going to strongly urge us, as much as you can” to watch something that is obvious and that we all know. If manipulation is occurring somebody will profit and they will be in the trouble they deserve.

Good luck with your efforts.

The post you responded to is a great example of why Elon wants to go private. This sort of disingenuous nonsense is par for the course with Tesla short sellers.

 

[ggr]

How does this work with the fund for common stakeholders to get converted into? You make it sound like you can only ever sell, never buy. Is that correct?

That's my understanding of how SpaceX works for the employee stockholders. I know nothing about whatever deal it was they had with Fidelity.

 

[neroden]

Maybe this warrants its own topic but

Let’s discuss realistically -

Is there any example of a situation to where an LBO has happened but small investors are still in?

I can't think of one.

My family was involved in a really bizarre situation where an oil company dissolved and distributed proportionate interests in every oil well they owned to the stockholders. (Have you ever imagined the headache of owning an undivided 1350/88350 interest in an oil well?) So all kinds of things are possible.

I cannot imagine the nightmare of keeping track of people who have 10 shares * 1 million as an example.

Oh, that's not a problem. The "transfer agent" handles it for a public listed company, *and I believe they will handle it for a private unlisted company too*. That's not the hard part. Tesla can still pay the transfer agent to keep track of shares.

You can even have unlisted shares in a brokerage account though the brokerage will charge you for them and try to convince you to put them into your name at the transfer agent.

I've been an investor in private companies (all complete losses or terrible experiences, sorry to say -- no positive experiences to report). The really small ones keep track of their investors themselves, but when they're bigger, they pay a transfer agent to do it for them. SpaceX is probably already doing this.

Transfer Agents – Not Just for Public Companies

 

[UnknownSoldier]

What does this mean for call option holders with strike prices below $420? How will you play it?

I'm holding some J19 $400 calls.

I don't have the cash to exercise otherwise I would. At this point I'm waiting and seeing, if a squeeze happens I'll sell them and convert to shares as they move into the money

 

[madodel]

It’s fud because it’s tilted towards the assumption of a lie.

If our news cycle was full of all the repercussions of false statements that’s all news would be. “GM today announces the manufacture of 13,000 vehicles...Great point Suzy, if that number is off you know the CEO is in for some prison time” said no reporter ever. Yet here we are.

Every company is bound when they make statements like this, why “are you going to strongly urge us, as much as you can” to watch something that is obvious and that we all know. If manipulation is occurring somebody will profit and they will be in the trouble they deserve.

Good luck with your efforts.

Watching CNBC today, most of the talking heads were visibly pissed at this event. They couldn't help themselves. They were downright angry and kept insinuating there is no way this can be true. And if it was true it was a scam. Sounds just like a certain troll here. And they think everybody else is a manipulative liar like themselves. They looked like they were caught and there was absolutely nothing they could do except shout that the liar/cheat was Elon. It was a truly surreal yet satisfying thing to watch. Tesla goes private these idiots have no say that matters. Which is exactly as it should be.

 

[neroden]

I am thinking about buying more shares tomorrow if the SP stays under 400 (already bought a bunch today).

Do any longs see any realistic chance the deal does not go through for a reason other than it gets voted down because the offering price is too low or some sort of force majeure/black swan event?

I personally see the only realistic chances of the deal not going through being (a) that the offering price is lower than the prevailing stock price, or (b) a force majeure / disaster event. However, This Is Not Investment Advice. Could be that a financier backs out because something else happens to their money.

 

[ggr]

@KarenRei I tried to buy SpaceX stock earlier this year through Equidate, a platform that allows buying privately held shares, but it was a total bust. My understanding is that SpaceX has a right of first refusal on privately owned shares that otherwise would be sold to the public and that as a result SpaceX shares are rarely if ever available for purchase.

My expectation is that the same will be true for Tesla although that is just a guess at this point since we don't have details yet.

If there are others with more experience/knowledge re SpaceX shares hopefully they can weigh in.

A few years ago a few of us researched this and came to the same conclusion... pretty much impossible for outsiders to get in.

 

[dakh]

Your math is right. The big catch is that options often basically stop trading after a merger or buyout becomes the big thing. So you *have to have enough funds or margin capacity to execute the option*; you can't be sure that you'll be able to sell it.

But at the last minute of the last day of public trading of TSLA your brokerage will fund your "execute then cash out" if you're in the money, correct?