TSLA Market Action: 2018 Investor Roundtable

[hellnoICE]

That's how I feel. Furthermore, I think that might be how many non fans see it. Can I express an opinion about this without being called a troll? It's highly offensive.

okay then, I meant short.

You’re basically expressing non-fan opinions on a Tesla fan site and expecting validation.

 

[notacoalminer]

Are you seeing way more FUD on TV than you are used to?

Are sites you normally trust shifting on Tesla?

I'm curious what is causing your POV to change.

I haven't watched TV for at least 10 years.

This is the main Tesla site I read. This and Twitter. I don't follow any short sellers.

My POV changed because Elon did something not right here, IN MY OPINION. And I feel disillusioned, and I fear for the future of the whole thing.

 

[JRP3]

Too many people are freaking out and losing their *sugar* over this. Remember when Elon said if you don't like volatility don't buy TSLA stock? Elon says what he means.

 

[JRP3]

The most astute (former) TSLA analyst Andrea James:

If dealing with the markets is a distraction for CEO & company, then that's the reality you solve for. Everyone says "Elon should XYZ" as in "ignore the shorts" or "just focus on the business" or "stop tweeting." I dunno. I say let Elon be Elon.

Andrea James on Twitter

 

[EinSV]

Too many people are freaking out and losing their *sugar* over this. Remember when Elon said if you don't like volatility don't buy TSLA stock? Elon says what he means.

Agree 100%. Elon clearly wants to take the company private, the Saudis obviously want to back him, he has put together the "A" team to get the job done and has lots of very well-heeled fans/backers to help make it happen. When your two main companies have generated better returns than almost any other stock on the planet (CAGR of ~45% since IPO for TSLA and even higher over the same timeframe for SpaceX) there are going to be no shortage of investors.

The media circus around Tesla never seems to end, but it's sad to see it blind so many people to what is very likely to be a positive outcome, while they let the big players and shorts buy up their shares on the cheap. It is quiet now because a deal is being put together. Patience has always paid off for Tesla investors and I doubt we'll have to wait for too long to see details.

Another critical point to emphasize is that before anyone is asked to decide on going private, full details of the plan will be provided, including the proposed nature and source of the funding to be used. However, it would be premature to do so now. I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors, which is something that I always planned to do since I would like for Tesla to continue to have a broad investor base. It is appropriate to complete those discussions before presenting a detailed proposal to an independent board committee. Update on Taking Tesla Private​

 

[neroden]

What, no comments on my really long and extensive set of calculations of share count for the go-private deal? Really? ;-)

TSLA Market Action: 2018 Investor Roundtable

OK, so FWIW, the Saudis could buy their position up to about 34.11 million shares (i.e. they could buy about 29.00 million more than my low-end estimate of what they have now) before they hit 20% (which would probably trigger CFIUS review). Or they could buy 11.94 million more shares before they hit 10% (which would probably trigger CFIUS review if they're buying *voting* shares). I'm going to assume the Saudis will accept non-voting shares, and I'm assuming they have the $12.18 billion needed to buy 29 million shares.

Now, CFIUS will probably accept Saudi investment due to the US government being in bed with the Saudis (sigh). But if it didn't, this would mean that under Musk's guess, they'd need third-party funding for about 5.37 million shares ($2.2 billion); if buying out half the miscellaneous stockholders, 8.48 million shares or $3.56 bililon.

Worst case where the Saudis will only go up to 20% and all the miscellaneous shareholders want out would require $33.47 billion of "outside" money.

Adam Jonas (yeah, I know) says that Musk's SpaceX stock is considered to be worth about $15 billion right now. Musk will probably still be able to borrow against Tesla stock when it's private; if he borrows against SpaceX, I think it would be conservative to assume he can get $7 bililon. (Though he may have borrowed against some of it already.) So he could fund some of this himself if he had to.

Elon Musk’s SpaceX could play 'crucial role' in his plan to take Tesla private: Morgan Stanley

We haven't even started talking about other possible funders, even though we know Silver Lake Kraftwerk wants in.

The big question is simply how many of the existing investors want to stay in. We're all guessing, which is why I'e run so many different scenarios here. Here's another, better way of looking at it (remembering that shorts have to cover):
$10 billion in funding will allow for 57.55 million shares to be bought out at $420
$15 billion in funding will allow for 69.45 million shares to be bought out at $420
$20 billion in funding will allow for 81.35 million shares to be bought out at $420
$25 billion in funding will allow for 93.26 million shares to be bought out at $420
$30 billion in funding will allow for 105.17 million shares to be bought out at $420
$35 billion in funding will allow for 117.07 million shares to be bought out at $420
$40 billion in funding will allow for 128.98 million shares to be bought out at $420
$45 billion in funding will allow for 140.88 million shares to be bought out at $420

(Edit: corrected calculation)

There are about 142.44 million shares held by miscellaneous investors (assuming Musk, Tencent, Saudis, Bailie Gifford, and insiders keep their shares).

 

[Fact Checking]

Despite the fact that it would seem to make sense to wait for the buyout at $420, I suspect a bunch of "weak longs" are bailing out now (perhaps because they don't trust Musk). This is probably something which makes Musk happy as he doesn't like to have traders who aren't committed in his stock.

I agree that this is an important process if it takes months for the deal to be finalized and if details are released that allow "eligible" private share owners to better identity themselves.

Also note how this process erodes the "math" of shareholder composition you outlined in the first half of your post: wouldn't this "buy-in of new investors" part of the process almost automatically reduce the pool of investors who have to be bought out?

I.e. any short squeeze depends on three main factors:

• how large is the global pool of investors who value private $TESLAP shares at more than $420,
• how granually is Elon and Tesla going to communicate these details to the public,
• how much time do new investors get to "buy in".

Note that:

• the fact that 33% of current shares might be ineligible is an initial condition that is not a constraint on conversion, it's a parameter that sets the length of the shareholder replacement process,
• price does not have to reach $420 for the replacement process to start: weak longs might bail; investors who do not think the deal is real or will pass might be selling now; investors who believe analysts about poor Q3 results might bail; once price gets above $400 in-the-money investors who think that there's a significant chance for the deal to fail might bail.

I.e. as we get to $420 first the percentage of "$420 sellers" might have dropped to 20-25% already - maybe lower.

Most importantly, note how this shareholder conversion process largely depends on the timing of releasing credible information about the going-private deal - which is under Tesla/Elon control.

If Tesla/Elon want a squeeze and shorts are dumb enough to stay, and there's enough interest in the private Tesla IPO, they can probably get a squeeze.

 

[generalenthu]

What, no comments on my really long and extensive set of calculations of share count for the go-private deal? Really?

TSLA Market Action: 2018 Investor Roundtable

OK, so FWIW, the Saudis could buy their position up to about 34.11 million shares (i.e. they could buy about 29.00 million more than my low-end estimate of what they have now) before they hit 20% (which would probably trigger CFIUS review). Or they could buy 11.94 million more shares before they hit 10% (which would probably trigger CFIUS review if they're buying *voting* shares). I'm going to assume the Saudis will accept non-voting shares, and I'm assuming they have the $12.18 billion needed to buy 29 million shares.

Now, CFIUS will probably accept Saudi investment due to the US government being in bed with the Saudis (sigh). But if it didn't, this would mean that under Musk's guess, they'd need third-party funding for about 5.37 million shares ($2.2 billion); if buying out half the miscellaneous stockholders, 8.48 million shares or $3.56 bililon.

Worst case where the Saudis will only go up to 20% and all the miscellaneous shareholders want out would require $33.47 billion of "outside" money.

Adam Jonas (yeah, I know) says that Musk's SpaceX stock is considered to be worth about $15 billion right now. Musk will probably still be able to borrow against Tesla stock when it's private; if he borrows against SpaceX, I think it would be conservative to assume he can get $7 bililon. (Though he may have borrowed against some of it already.) So he could fund some of this himself if he had to.

Elon Musk’s SpaceX could play 'crucial role' in his plan to take Tesla private: Morgan Stanley

We haven't even started talking about other possible funders, even though we know Silver Lake Kraftwerk wants in.

The big question is simply how many of the existing investors want to stay in. We're all guessing, which is why I'e run so many different scenarios here. Here's another, better way of looking at it (remembering that shorts have to cover):
$10 billion in funding will allow for 61.29 million shares to be bought out at $420
$15 billion in funding will allow for 73.19 million shares to be bought out at $420
$20 billion in funding will allow for 85.10 million shares to be bought out at $420
$25 billion in funding will allow for 97.00 million shares to be bought out at $420
$30 billion in funding will allow for 108.91 million shares to be bought out at $420
$35 billion in funding will allow for 120.81 million shares to be bought out at $420
$40 billion in funding will allow for 132.71 million shares to be bought out at $420
$45 billion in funding will allow for 144.62 million shares to be bought out at $420

There are about 142.44 million shares held by miscellaneous investors (assuming Musk, Tencent, Saudis, Bailie Gifford, and insiders keep their shares).

No comment..I think after a few iterations, we converged to the right calculations. My personal guess is between 10-15 billion in funding needed.

 

[neroden]

The most astute (former) TSLA analyst Andrea James:

Andrea James on Twitter

Thanks! This gives me a new scenario.

Suppose every institution except Bailie Gifford dumps their shares (because private equity and public equity desks are separate, sigh) -- while 1/2 of all miscellaneous non-institutional investors stay in (because the other half have their money in Canadian RRSPs or equivalent). After accounting for the shares bought back by the short-sellers, that would require funding for 79.80 million shares, or about $33.5 billion. Again, if the Saudis can really buy up to ~20% (perhaps with nonvoting shares), Musk can swing the rest of the funding personally if need be.

(At Bailie Gifford, a small firm, public and private equity desks aren't separate, and their principal has said he wants his clients to keep their Tesla stock, which is why I figure they will keep theirs.)

This is basically the most expensive plausible scenario I can see. I figure at least half of non-institutional longs are both "true believers" and able to stay in.

 

[Cosmacelf]

The most astute (former) TSLA analyst Andrea James:

Andrea James on Twitter

Yes, well worth reading this twitter string. For those that don’t know Andrea, she used to be the smartest and most correct Tesla analyst before she went off to do something else.

 

[TrendTrader007]

I definitely agree that TSLA is not going to trade sideways for long. We will see which way this little triangle breaks. My guess is it breaks down and then up. I'm not betting on that though. It just feels to me that the control right now while we are drifting without definitive news is with the bears. Moderately positive news is having no positive effect on the SP, or even a negative effect after it is spun that way. It seems like real longs are frozen right now, maybe added a bunch just after the privatization announcement? Opportunistic longs are still waiting. The stock usually surprises me how far it can go down for no substantial reason. We are only down 10.3% from the $387 high on 8/7. Maybe it will continue to go down against all reasonable assessments of the situation just because that's truly what TSLA often does.

You are in good shape with your J19s. Shares are obviously very safe. I think the real risk right now is going too short term, meaning within just a few weeks out. TSLA will reverse and climb again soon, but it could take a few weeks. I'm starting to think about rolling my SEP calls out to OCT for a little more breathing room. I've been accumulating J19, NOV, and DEC calls over the past few days. Now I think I'm going to sell some puts.

Wow! You were right! I do think the bottom is very near like it was either today or tomorrow
With nasdaq futures up nicely 35 points this evening I suspect a rebound tomorrow
I’m scared out of my mind with my J19 $300 and $250s down like 16 to 18% today and my call portfolio down well over xxx today and I had strong desire to switch from calls to stock but I know in my heart that it would precisely be the wrong move
I still totally believe that $TSLA will run up to high $400s to low $500s within the next 20 to 32 trading days
As long as EMAs are all aligned bullishly I will stay with my current position at least until then and see what happens

 

[EinSV]

Thanks! This gives me a new scenario.

Suppose every institution except Bailie Gifford dumps their shares (because private equity and public equity desks are separate, sigh) -- while 1/2 of all miscellaneous non-institutional investors stay in (because the other half have their money in Canadian RRSPs or equivalent). After accounting for the shares bought back by the short-sellers, that would require funding for 79.80 million shares, or about $33.5 billion. Again, if the Saudis can really buy up to ~20% (perhaps with nonvoting shares), Musk can swing the rest of the funding personally if need be.

(At Bailie Gifford, a small firm, public and private equity desks aren't separate, and their principal has said he wants his clients to keep their Tesla stock, which is why I figure they will keep theirs.)

This is basically the most expensive plausible scenario I can see. I figure at least half of non-institutional longs are both "true believers" and able to stay in.

I think Silver Lake is virtually a lock to be investing in TSLAP. They are advising on the deal with an eye toward being part of the consortium. A Tesla Take-Private Bid Would Be More of the Same for Silver Lake. Sort of.

The amount is harder to pin down -- maybe $2B?

 

[UnknownSoldier]

I wonder if David Tamberrino is sad that he's no longer able to "analyze" Tesla. For awhile there he got 5 minutes of Internet fame as the guy that Elon called a "bonehead" on the earnings call. Now's he's back to being a boring analyst who is ranked #4,646 out of 4,857 analysts on TipRanks.

 

[Fact Checking]

Therefore, even when good news comes, like the impending 6k/week announcement, the stock price is likely to jump, then pushed down quickly.

I don't think this will be the case if the pool of new investors who value a private $TESLAP share at $430+ is larger than the pool of old investors who want to or have to sell at $420 or lower.

For which there is a considerable chance:

• The pool of "have to or want to sell" shares was around 60 million last week and is shrinking every day - it could already be 55 million today,
• The negative SEC news that a certain big market participant was insider trading on for the last ~7 days is now public knowledge. I believe we are at or near peak FUD and the relentless stream of FUD will fade.
• The positive news will keep coming: Q3 numbers, positive opex, positive cash flow, profitability will all nullify key bear/short arguments.
• Amazingly, short interest is still not dropping significantly.

I.e. the pool of sellers will shrink, the pool of buyers will grow. These forces will eventually overwhelm any attempts to keep the stock price down.

 

[EinSV]

I wonder if David Tamberrino is sad that he's no longer able to "analyze" Tesla. For awhile there he got 5 minutes of Internet fame as the guy that Elon called a "bonehead" on the earnings call. Now's he's back to being a boring analyst who is ranked #4,646 out of 4,857 analysts on TipRanks.

With a record like that it's time to find a new profession.

 

[TrendTrader007]

It seems to be very difficult to tell at this point I think:

• Elon appears to be wanting to rush the deal, but rushing it might be counterproductive due to the ~60m current shares that are not convertible. Time is required for new investors to buy out investors unwilling or unable to own TSLAP.
• I think the IPO would be most effective if Q3 (and maybe Q4) results are released as a public company. This maximizes public Tesla valuation that should be over $400 even if the going-private deal falls through.
• It's unclear to me whether Elon wants Tesla to directly earn money from the combined rush of new shareholders and covering shorts to buy TSLA. (There's a few ways they could architect the deal and time key disclosures and plan for the aftermath to maximize this effect - but I don't know whether they are doing it.)
• The interests of small shareholders are only about 70-80% aligned with the interests of the buyout financing companies. For example buyout financing companies do not mind forced sales at all, because it increases their stake after the buyout. It's unclear to me to what extent Elon and the Tesla board will be able to represent 100% of shareholder interest.
• It's unclear to me how smart shorts are. Right now they probably still have a chance to escape with a chewed off arm or leg. A few weeks/months later the injuries of short position liquidation could be life threatening to many shorts. The magnitude of the short squeeze (if any) depends on the short interest percentage and on the position sizes and margin limit distribution of the shorts, compared to the profit target distribution of the longs/investors. These numbers may still vary in wide intervals.

With linear stock position the strategy seems clear to me: hold and maybe buy on dips. (Risk: take a big bath if the deal falls through early and/or Q3-Q4 results are below guidance or expectations or there's WWIII.)

With options it's mostly about timing, and timing seems the most uncertain parameter right now. Most straightforward trade seems to be to map out the most popular trades of shorts and become a counterparty. Be ready to lose it all, shorts are a broken clock that are right four times a day.

(Four times a day, not two times, because Elon is accelerating the clock of the Tesla business cycle to twice its normal speed.)

Not advice!

Supercool! Appreciate your keen insight thx

 

[TrendTrader007]

I think it is evident, that Elon made a mistake by announcing privatisation idea too early.

Just because the stock is down over the last 6 trading days does not make it a mistake
The phenomenon of recency is so strong in the markets
Just wait till the stock makes a turnaround and starts shooting up then all “mistakes” will be quickly forgotten

 

[Fact Checking]

I wonder if David Tamberrino is sad that he's no longer able to "analyze" Tesla. For awhile there he got 5 minutes of Internet fame as the guy that Elon called a "bonehead" on the earnings call. Now's he's back to being a boring analyst who is ranked #4,646 out of 4,857 analysts on TipRanks.

I'd guess Tamberrino is relieved that GS conflicted him out: he got a face saving way out of a messy prediction of $200 TSLA, where in a few short weeks the Q3 results could easily have obliterated any residual credibility Tamberrino might still have as an analyst.

Good riddance in any case.

 

[SOULPEDL]

"one of the best"?
What are you a bear now?
A short?
A troll?

Come on, dude.

Ya, besides SpaceX, dude.

 

[TrendTrader007]

To illustrate the danger of selling $TSLA calls right now here is a possible scenario
Look at this chart of $LVS in 2007