TSLA Market Action: 2018 Investor Roundtable

[KarenRei]

Agree with Robertj1) You have NO idea how many shares that are currently owned by institutions will not be able to participate.

It doesn't take many. Most of the stock is owned by large institutions.

2) The market is far from perfect ... there will be an imbalance .... on which side, who knows?

You're arguing against the very tenets of the laws of supply and demand. Nobody is going to hold on for $420 when they can sell for $420,01. You're dreaming if you think they will.

 

[WarpedOne]

It doesn't take many

?
It takes at least +30M shares.
Even one single missing share puts the sky at the limit.

 

[Fact Checking]

From just before ($200) to the peak ($950 ish) was 4.75x. Starting at $348.17 (last friday's close, post Q2 earnings, before Saudi and delisting) my guess is >= $1653.80.

October 2008 Volkswagen short squeeze timeline:

So I did a bit of Volkswagen short squeeze archaeology.

Volkswagen is trading on a number of instruments, but their main instrument is "Volkswagen AG ST O.N." on XETRA, which was squeezed the hardest in 2008.

You can follow part of the squeeze on the Yahoo Finance chart as well:

VOW.DE : Summary for VOLKSWAGEN AG ST O.N. - Yahoo Finance

NOTE: Curiously the Yahoo Finance data for the key 2008.10.28 day of the short squeeze has been edited for unknown reasons, but it's not the correct historic price action of that day: the short squeeze spike has been edited away in the Yahoo data. In my post I'm using accurate historic data, but the data source is not public so I cannot link to it.

Here's the timeline of the Volkswagen short squeeze:

• Firstly, in August and September of 2008 the pre-squeeze Volkswagen price levels were fluctuating in a relatively narrow band around ~200€, on a low 1-3M shares/day volume, with low volatility, up to 2008.09.12.
• On 2008.09.15 (a Monday) volume spiked up: this was I believe mostly due to the global effects of the Lehman Brothers bankruptcy, not directly related to the impending Volkswagen short squeeze.
• On 2008.10.24 (Friday) Just before the short squeeze there was a daily low of 201€ on average post-Lehman volume levels, with a closing price of 210.9€.

• Over the weekend the Porsche broke: Porsche revealed in a surprise announcement on Sunday that it had effectively gained control of 74 percent of Volkswagen’s voting shares. With Lower Saxony owning another 20% stake the possible float reduced to just 6% - while the short interest was larger than this, around 13%.
  
• On 2008.10.27 (Monday) On this news all hell broke loose: a brutal gap to 350€ on open and an intraday spike to 635€ on heavy volume, 520€ closing price. Speculation: the daily low is documented as 471€, which means that the opening price probably went up monotonically in the first tick and never dropped below 471€ - and only few shorts got execution at the 350€ opening price. So the true opening gap was probably around +123%, and this probably instantly margin-called a lot of shorts who probably had cash collateral posted at around 100%.
• On 2008.10.28 The next day (Tuesday) was the height of the short squeeze: open on 500€, intraday spike to 1005€ (!), a low of 471€, closing price of 945€, very close to the high.
• On 2008.10.29 On Wednesday the wildest part of the short squeeze was over, the high was to 607.1€
• Price and volume slowly went down over the week, but still closed at EUR 499.5 on Friday - which was the end of month as well. Within 4 weeks the price was back to 255 levels.

Permanent short squeeze price effects: note that price remained at elevated +20% levels despite the biggest financial crisis raging: I'd guess this was in part the anti-dilutive effect of many shorts closing.

In case you distrust my data based on the edited Yahoo Finance chart you can see the spike to just beyond 1000€ in this contemporary Reuters article as well:

Short sellers make VW the world's priciest firm

In that chart you can see how the price shot up to 1000 a couple of times in the first hour of trading before settling down to lower levels - and then spiking up again for the close of the day (not visible on that ticker chart yet).

Executive summary:

• During the October 2008 Volkswagen short squeeze the share price gapped up by over +102% on the opening of the first day of the squeeze and went from 210.9€ to 1005€ within two trading sessions, a 4.7x (+370%) increase.

• Extreme price levels (compared to the pre-squeeze price) lasted a full week, 5 trading sessions.
• Post short squeeze price levels remained elevated at +20%, despite the end of 2008 financial crisis raging.

 

[KarenRei]

?
It takes at least +30M shares.
Even one single missing share puts the sky at the limit.

Yes, around 1/5th of the shares are short.

Meanwhile, the only party who we can reliably say won't be selling any is Musk, who only owns 1/5th of the company. 4/5ths of the company's ownership is comprised of entities that either A) may want to sell, or B) may be forced to sell. That's pretty darned optimistic to assume that 80% of the ownership will both A) want stay in at a price of $420, and B) be capable of staying in.

 

[schonelucht]

If yes, then they need to request most of the 34M shares shorted. THAT might trigger the squeeze. Because shorts need to buy the shares back for the lenders.

We had the wishfull thinking on a squeeze due to shareholders recalling their shares for the solarcity merger vote too. In the end it fizzled big time. A portion of the short covered but most just got other shares. No squeeze occured. Of the 150M shares, only 113M voted (includes interested parties like Elon). Leaves enough shares to lend out for shorts to have an orderly wind down. Shorts will find enough sellers around $420, maybe a little above that price if the offer is really solid, maybe a little under that price if there remain doubts on the offer after it has been revealed. But nothing in terms of a squeeze to $500+ as some are hoping.

 

[Dan Detweiler]

OK, so as the resident idiot savant on this thread someone needs to explain a few things to me. I see many talking about "when the price hits $420" or "when it goes over $420". Last I checked we were about $80 shy of that mark. How is it going to rise that much, that fast? I have seen fluctuations of maybe $15-$20 one way or the other so seeming so confident about an $80 upswing seems a bit presumptuous to me. Don't get me wrong, I would love to see it and the sooner the better (My car should be delivered in the next two months or so), but I am having my doubts. Can someone please educate the guy in the corner wearing the "Dunce" cap...aka, me!

Dan

 

[Fact Checking]

4/5ths of the company's ownership is comprised of entities that either A) may want to sell, or B) may be forced to sell. That's pretty darned optimistic to assume that 80% of the ownership will both A) want stay in at a price of $420, and B) be capable of staying in.

The biggest flaw of logic in this argument is that you are assuming that the composition of shareholders is static, while in reality it's highly dynamic:

• The agreement will likely take months, which means that everyone who wants to be part of the private Tesla story will try to buy the stock.
• If price levels go beyond $420 then these new willing investors will quickly replace any reluctant investors who want to cash out.
• Once enough shareholders have announced intent to vote 'yet' this process will further accelerate.
• Any additional disclosure that lays out the exact process of the transfer deal will bring more clarity - and more 'willing' shareholders on board.
• It will make little sense for shareholders to stay on board just to vote 'no' in a symbolic minority opinion.
• During these months the Q3 and Q4 financial reports will be released - which might have a positive effect on future share price levels as well.
• Shorts drip-drip covering will also increase the price.

I.e. at this point the only factor reducing the price will be significantly negative events.

Everything else will increase the price: and once a transfer deal is approved and enough shareholders have announced an intent to vote 'yes' (which might happen in the same announcement) there will be an effective $420 price minimum in place as well.

 

[jeewee3000]

OK, so as the resident idiot savant on this thread someone needs to explain a few things to me. I see many talking about "when the price hits $420" or "when it goes over $420". Last I checked we were about $80 shy of that mark. How is it going to rise that much, that fast? I have seen fluctuations of maybe $15-$20 one way or the other so seeming so confident about an $80 upswing seems a bit presumptuous to me. Don't get me wrong, I would love to see it and the sooner the better (My car should be delivered in the next two months or so), but I am having my doubts. Can someone please educate the guy in the corner wearing the "Dunce" cap...aka, me!

Dan

Just consider the facts from this weeks trading:

- Elon's announcement to (try to) go private at $420 caused a rise in SP from the $350's to $387 in one day;
- in the following days the SP dropped due to disbelief/uncertainty that this deal is real/possible;
- next week the board will meet to discuss, if they confirm funding is secure and it is possible, we will be back at $387 easily , but then the floor/ceiling is really $420

TLDR: if you trust Elon was not kidding around, $420 is coming sooner or later. We will swing hard before that though (as usual).

 

[elliott82]

I hold some DITM J20 250€ calls. Any suggestions as to whether convert them to stock or keep for now?

 

[Ellec]

Yes, around 1/5th of the shares are short.

Meanwhile, the only party who we can reliably say won't be selling any is Musk, who only owns 1/5th of the company. 4/5ths of the company's ownership is comprised of entities that either A) may want to sell, or B) may be forced to sell. That's pretty darned optimistic to assume that 80% of the ownership will both A) want stay in at a price of $420, and B) be capable of staying in.

Institutional investors such as Mutual Funds can and do invest in private companies.
This is the secret on how mutual funds are juicing their returns you should know about

And recent polls have shown 70-80% of retail investors would remain invested.

Another component is that new and current investors will want in before Tesla goes private.

Shorts are going to be chasing a scarce resource when they want to cover.

 

[Ellec]

I hold some DITM J20 250€ calls. Any suggestions as to whether convert them to stock or keep for now?

What I did with my J20 calls was sell them and buy some ITM November calls. Cheaper and this is likely to be resolved before then.

 

[WarpedOne]

How is it going to rise that much, that fast?

That is a serious question?
Do not compare usual trading with an unusual one.

With a private/delisted tesla there is no more day trading, no more short-term bets on the future and no more future buying.
You have what you bought in the past and you can only sell that once.
The only lever you are left withj is a timing of your sell.
And you also do not know when exactly the fun stops.

This privatization thing is also a hard kick in the balls of large instituional holders who were happy lending their shares for shorting and collecting interest.
This game will no more ... they can eather stay and let their share rise ten our hounderd times or just leave and collect those 420.
They can put up or be left behind forever.
They are aware of it and will think ten times before leaving.

 

[uselesslogin]

Institutional investors such as Mutual Funds can and do invest in private companies.
This is the secret on how mutual funds are juicing their returns you should know about

And recent polls have shown 70-80% of retail investors would remain invested.

Another component is that new and current investors will want in before Tesla goes private.

Shorts are going to be chasing a scarce resource when they want to cover.

So, according to the article you linked to mutual funds can only have 15% of their assets in private companies. So I still haven't seen a precedent for what Elon is suggesting.

 

[mongo]

Can anyone explain why the investors Elon has lined up are not purchasing now while it is still below $420?

Because it is too much money. Even in normal times, large share buyers cause the price to move up. Someone with a $20B buy order would sent the price shooting up.

And also, Tesla as a private company can be more attractive than Tesla as a public company to a certain kind of buyer.

Finally, if done as a deal, the new buyers would demand and get board seats. Unmentioned in all this is that probably about 1/3 of the board will turnover when Tesla goes private. Not a big deal, unless you are one of those board members

They may well have substantial positions in common shares already. Certainly better prices were to be had prior to Elon's tweet. The value for them is in seeing their common shares upgraded to private share, and for that they are willing to guarantee a cash out price to see that the transaction goes through. Also after the transaction is agreed to, they may buy more shares to avoid having to buy them at $420.

Based on the volumes and price movement compared to the usual trading, I'd say either someone(s) is accumulating or shorts are covering.
In the last two days 41 million shares were traded and the price dropped 18 dollars. Looking at the morning dip yesterday with >100k per minute trading levels, there was minimal downward movement.
I agree the backers of this plan should be purchasing like crazy at this price point, assuming their capital is not financed. It's a 20% discount for each share they acquire.
The key is they are not putting in large market orders, that would push things up, rather they could keep placing small market orders and/or staggered limit orders below the current price.

 

[SwTslaGrl]

Tesla private equity could be "the holy grail of investing" - high expected return with low volatility/risk

 

[lklundin]

Executive summary:

• During the October 2008 Volkswagen short squeeze the share price gapped up by over +102% on the opening of the first day of the squeeze and went from 210.9€ to 1005€ within two trading sessions, a 4.7x (+370%) increase.

• Extreme price levels (compared to the pre-squeeze price) lasted a full week, 5 trading sessions.
• Post short squeeze price levels remained elevated at +20%, despite the end of 2008 financial crisis raging.

Thanks. Hectic stuff, btw.

If something similar were to happen with TSLA would the associated, elevated trading volume somehow create a risk that a trade could be executed (due to e.g. server/connection overload somewhere) ?

 

[Scuttlebutt]

Based on my reading of the posts from our resident experts, It looks to me that a path will be created for those with self-directed IRA's holding TSLA to go private, correct?

If that is true, can anyone tell me with any certainty that we will be able to ADD to our positions ( 2x/yr) once we have gone Private?
If so, any idea what the limits would be?

If a major squeeze happens wouldn't a person want to sell some X# of shares to later re-invest in the Private fund?

Sorry, if these questions sound silly I am an investing Newbie here and my head is spinning trying to process all this and make a smart decision for my small but very important TSLA holdings. I realize this could be a life-changing event for me and I really want to get this right.
Would very much appreciate any and all advice!

 

[winfield100]

Unless your plan is to take the proceeds from a putative sale and retire TOMORROW, I think it would be very short-sighted to divest all (-->ANY<--) your shares into a squeeze.

IF you have a longer time horizon, remember if you bought MSFT and AAPL pre any splits,
they are worth $31,584+/share and $11,687/share
(wish I could send a letter to my 40 year younger self, but causality loops don't seem to work so far, other than pictures)

 

[lklundin]

IF you have a longer time horizon, remember if you bought MSFT and AAPL pre any splits,
they are worth $31,584+/share and $11,687/share
(wish I could send a letter to my 40 year younger self, but causality loops don't seem to work so far, other than pictures)

Deja vu ?

 

[winfield100]

Based on my reading of the posts from our resident experts, It looks to me that a path will be created for those with self-directed IRA's holding TSLA to go private, correct?

If that is true, can anyone tell me with any certainty that we will be able to ADD to our positions ( 2x/yr) once we have gone Private?
If so, any idea what the limits would be?

If a major squeeze happens wouldn't a person want to sell some X# of shares to later re-invest in the Private fund?

Sorry, if these questions sound silly I am an investing Newbie here and my head is spinning trying to process all this and make a smart decision for my small but very important TSLA holdings. I realize this could be a life-changing event for me and I really want to get this right.
Would very much appreciate any and all advice!

It could be structured vaguely similar to the US Govt Thrift Savings Plan (TSP)
You can _only_ add funds, every two weeks and only shift rarely among funds they manage (perhaps SpaceX, or TE, or Mars Colony or something) and when you close out, it is structured either conservatively or you get everything and are done forever. So you want to stay in
I like the low volatility, low heartache,