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Running counter to this is... how what current institutional investors will not be able to take part in a private Tesla, and how many shares will they have to sell, putting them on the open market? I don't think we've really quantified this yet.
Munster estimated that 50% of institutional shares would sell including the ones forced to sell and the rest would invest with the private TSLA. That seems as good a guess as any -- I used that number in my calculations.
But don't the private investors have to also take on the debt/bonds That would push that number back up wouldn't it?Exactly. I don't know why no one in the media seems to understand that the shorts are buying back something like 1/2 of the shares necessary to close Elon's deal that will burn their position into the ground. Poetic justice.
Here is the math according to Gene Munster in the post above:
"Insiders, including Musk, own just over 25% of Tesla shares. Individual investors account for 12% of shares, and large institutional investors like Fidelity and T. Rowe Price make up the remaining 63%. We believe nearly all investors would be supportive of going private, but not all institutional funds would be able to participate in private investments. For that reason, we assume half of Tesla’s institutional ownership (~30% of the company) needs to be bought out. Individual investors, who see greater upside than 13.5%, would likely prefer to maintain ownership if they are able to, depending on fund structure and accredited investor requirements. In short, the more shareholders that decide to roll their shares into the private entity, the less funding Tesla will need for a buyout. By our math, Tesla will need between $25 and $30B."
But Munster does not account for the fact that there are effectively 205 million shares outstanding because shorts have borrowed 35 million on top of 170 million actual shares outstanding.
Once the short sellers are forced to buy those shares back for ~$13billion, the new investors only need to pay something like $13-$15B to get the deal closed. The shorts buy out the rest of the institutions and retail shareholders who don't want to be part of the private Tesla.
If 50% of institutional investors will be selling, shorts will have no trouble covering.
Running counter to this is... how what current institutional investors will not be able to take part in a private Tesla, and how many shares will they have to sell, putting them on the open market? I don't think we've really quantified this yet.
The TSLA shares owned those institutions will be bought by Elon's group at $420 each. There shouldn't be a need for those shares to be sold on the open market. I expect it's already been determined who those sellers will be.
But the floor has been set at $420, so even though shares would be available, every single short would be covering at a loss.If 50% of institutional investors will be selling, shorts will have no trouble covering.
Well, there’s one difference. Reuters doesn’t actually have BS built into their name.Oh it’s fud all right. No difference between them/ media or spiegel.
They don't have to sell on open market, they can wait and get $420 from Musk. Or if deal falls through, no changes to them.Running counter to this is... how what current institutional investors will not be able to take part in a private Tesla, and how many shares will they have to sell, putting them on the open market? I don't think we've really quantified this yet.
But the floor has been set at $420, so even though shares would be available, every single short would be covering at a loss.
Not throwing darts here - just asking. How do we know that Elon is acting as an individual? TSLA lists his twitter feed as a way to follow TSLA information. Nothing in his tweets indicates "I'm not speaking for TSLA here, but am considering going private." Since he wants to KEEP his shares and likely have some sort of role/promote with TSLAP, the board would still ask him to recuse himself. As such a large shareholder, still easy for the board to establish that boundary to due to the personal benefit to Elon.My musings, since I have a few minutes before I have to moderate some more.
1. Remember to identify the players. In this situation, Elon is acting as an individual who, for valid business reasons, wants to take Tesla off the stock market. He has a perfect right to talk to people about funding and negotiate with them, and with Tesla.
2. He probably does have to recuse himself from the board for the purposes of any decisions. Hence why it was the other directors saying that they are evaluating.
3. Therefore, Elon is not representing Tesla's board in this. He represents the investment consortium.
4. No-one has to disclose anything at this point. It's a negotiation, that's all. In fact it would be very surprising to have any of the details publicly disclosed. (I could write a letter to GM's board offering to take them private. Would they have to file an 8-K? Don't be silly.)
5. Elon doesn't have to tell Tesla's board who his backers are. It's up to them to judge his credibility. He's pretty credible. (see 4 above.)
The media have to say something, so they make stuff up, or get someone else to make stuff up, so they can report on it. Don't fall for it.
Sorry, wrong. The institutions are guaranteed to get $420 if the deal goes through, but they get that when the deal is finalized. The shorts have to cover before then, especially if the stock price starts going up. Some people here have said "So why wouldn't the institutions sell at $421, or $425, thereby stopping any short squeeze?" Well, the institutions have to compete to get 401k business. (Disclosure: I was a trustee for ex-employer's $2B 401k plan.) When the annual review comes up, and you see that fund A, whose managers sold TSLA at $421, performed much worse than fund B, whose managers followed the squeeze up and sold at $500 or $600, well, fund A could be in trouble. No, the institutions will not put a cap on any short squeeze that may (or may not) eventuate.If 50% of institutional investors will be selling, shorts will have no trouble covering.
Why would they sell to the Elon Group for $420 when they could be selling to shorts at $421?
Sorry, wrong. The institutions are guaranteed to get $420 if the deal goes through, but they get that when the deal is finalized. The shorts have to cover before then, especially if the stock price starts going up. Some people here have said "So why wouldn't the institutions sell at $421, or $425, thereby stopping any short squeeze?" Well, the institutions have to compete to get 401k business. (Disclosure: I was a trustee for ex-employer's $2B 401k plan.) When the annual review comes up, and you see that fund A, whose managers sold TSLA at $421, performed much worse than fund B, whose managers followed the squeeze up and sold at $500 or $600, well, fund A could be in trouble. No, the institutions will not put a cap on any short squeeze that may (or may not) eventuate.
Why would they sell to the Elon Group for $420 when they could be selling to shorts at $421?