Tracking short interest

[MikeC]

I'm thinking that you should be scared. If there are no shares available at all, I would expect Fidelity to be returning their own shares that they own. But at some point, Fidelity will be out of shares owned by Fidelity.

I expect, for instanced, that the loaned out shares in margin accounts - those positions will get closed out for $420 cash / share.


Anybody have the phone number for Fidelity Capital Markets handy?

EDIT: Here they are:
Fidelity Capital Markets
800.471.0382

Thanks for the number, I may be calling it tomorrow.

But to your point, even if Fidelity runs out of Fidelity-owned TSLA shares, are they not obligated to hunt other ones down to return to me? There is going to be someone, somewhere that will sell their shares for a high enough amount. Hell, I'd do it - I'll sell them the shares they borrowed from me for a very nice premium.

I guess I'm specifically trying to learn whether a solvent Fidelity has a legal/contractual obligation to find shares somewhere, or whether they can just say, "We tried our best, sorry, here's your cash collateral."

 

[adiggs]

Thanks for the number, I may be calling it tomorrow.

But to your point, even if Fidelity runs out of Fidelity-owned TSLA shares, are they not obligated to hunt other ones down to return to me? There is going to be someone, somewhere that will sell their shares for a high enough amount. Hell, I'd do it - I'll sell them the shares they borrowed from me for a very nice premium.

I guess I'm specifically trying to learn whether a solvent Fidelity has a legal/contractual obligation to find shares somewhere, or whether they can just say, "We tried our best, sorry, here's your cash collateral."

It's the latter bit that I don't know, and I'm worried / scared about. In a market with 35M short shares and then conversion day arrives, that sounds like a game of musical chairs with not enough chairs. For people who own their shares, they'll get a seat (cash, or private stock in the new company).

People with margin loans against their shares, and people that have lent their shares out - they've identified a price they will accept in an extreme event (such as the company being delisted). For those shares, there is an escape hatch, even if its unpleasant.

In a game without enough chairs (shares to buy to close short positions), anything with an escape hatch starts looking good.


This is my amateur, I don't really know, point of view on things.

 

[EinSV]

I also recalled all my shares yesterday after the news broke. I believe the stock has the potential to increase 10-30X over the long run and did not want to risk losing out to earn a few months of interest.

In a going private situation if the *sugar* hits the fan I am concerned that having a legal claim against Fidelity is not the same as having the shares in hand.

Not advice — especially because interest could easily reach astronomical levels like it did for SCTY during the merger and the risk is probably extremely low.

 

[adiggs]

I also recalled all my shares yesterday after the news broke. I believe the stock has the potential to increase 10-30X over the long run and did not want to lose out to earn a few months of interest.

In a going private situation if the *sugar* hits the fan I am concerned that having a legal claim against Fidelity is not the same as having the shares in hand.

Not advice — especially because interest could easily reach astronomical levels like it did for SCTY during the merger.

If the interest WAS astronomical, then things might be different. But 1% just doesn't hack it


Also not an advice - just my thinking and how it applies to my situation.

 

[neroden]

I had assumed that the collateral money was only to be used if the brokerage itself went bankrupt. Is there a legal scenario where the brokerage could remain solvent, but still only return the collateral? Or even return the full market value of the stock at the time but not the stock itself?

Yes. It's *extremely unlikely*, and I do mean *extremely unlikely*, but suppose the number of stockholders willing to sell, at *any price*, dropped to zero. (For instance, if the short-sellers bought every share offered, and then there weren't any more because all remaining shareholders were unwilling to sell at any price, not even at $50000.) Trading would halt.

Fidelity would not be able to return shares to everyone who lent them out, because there would be *literally nowhere to get them from*.

This is super super unlikely, as in, it hasn't happened in over 100 years, but I don't want to risk it anyway.

 

[neroden]

I guess I'm specifically trying to learn whether a solvent Fidelity has a legal/contractual obligation to find shares somewhere, or whether they can just say, "We tried our best, sorry, here's your cash collateral."

They have a legal/contractual obligation to find shares somewhere, but suppose trading has halted and there are literally no shares for sale anywhere. They'd have a force majeure situation.

I really think the chance of this is less than 0.01%, but it adds to the considerations -- especially since there could be record dates which matter.

I'm considering having my shares issued into my name (direct registration) because there *have* been merger deals where people with direct registration got options which people holding through brokerages did not get.

 

[winfield100]

I'm considering having my shares issued into my name (direct registration) because there *have* been merger deals where people with direct registration got options which people holding through brokerages did not get.

This is intriguing. If I hold the shares directly, there is (i think) zero option of them being shorted and gives a higher priority to the "never shorters"

 

[MikeC]

Well, you guys (and the crappy 1%) convinced me and I recalled mine this morning. Sold DOTM LEAPs against my recalled shares and got a lot more than I’d ever make in interest. Now I just hope the share price doesn’t go above 420-500 when it goes private.

Btw, I asked the guy if he thought interest rates might go up soon and he said there’s plenty of shares available right now but that might change closer to the vote.

 

[Yonki]

Weird: Fidelity raised the rate it pays yoj to loan out your shares to 0.875%, but as far as I can tell they're not making shorts pay anything to short it.

That's not how I thought it worked...

 

[MP3Mike]

Weird: Fidelity raised the rate it pays yoj to loan out your shares to 0.875%, but as far as I can tell they're not making shorts pay anything to short it.

That's not how I thought it worked...

I think that is because there are two rates: One for how much it costs to borrow the stick, and a rebate that is how much the broker pays you for holding your collateral that you have to put up while shorting the stock. If something is really "easy" to borrow it is possible that you actually get paid to short a stock.

 

[Yonki]

Yikes, I hope Fidelity doesn't start paying people to short Tesla.

Supply seems to be drying up on the no-uptick-rule day - shares available to short (again, at Fidelity) went from about 2 million yesterday to 900,281 today. Still not labeled as "hard-to-borrow".

 

[MikeC]

Anyone here still lending? I recalled mine during the going private event and never bothered to lend them out again.

Ihor is reporting plenty of shares available. I’m curious about what rates are still being offered.

 

[Rarity]

Anyone here still lending? I recalled mine during the going private event and never bothered to lend them out again.

Ihor is reporting plenty of shares available. I’m curious about what rates are still being offered.

Like you, I recalled mine during the going private event and never bothered to lend them out again. Lending rates appear to be minimal at Interactive Brokers.

IBorrow Desk

 

[Toolsmack]

Anyone here still lending? I recalled mine during the going private event and never bothered to lend them out again.

Ihor is reporting plenty of shares available. I’m curious about what rates are still being offered.

View attachment 354041

Ihor states directly that it almost a general collateral stock borrow meaning it is easy to borrow and thus is not charged any raised fee.

 

[EVNow]

Well, you guys (and the crappy 1%) convinced me and I recalled mine this morning. Sold DOTM LEAPs against my recalled shares and got a lot more than I’d ever make in interest. Now I just hope the share price doesn’t go above 420-500 when it goes private.

Wow. Where are the LEAPs now ?

 

[MikeC]

Wow. Where are the LEAPs now ?

Ha, that seems so long ago! I bought them back at various times for a slight profit before and after the privatization was cancelled. Would have actually made pretty decent gains if I'd waited until the SP dropped to 250. But I got some calls down there, so all good.

My only remnant from that fiasco is a Jan 20 420 put I sold (cash-secured) that I refuse to close out at a loss.

 

[MikeC]

Ihor states directly that it almost a general collateral stock borrow meaning it is easy to borrow and thus is not charged any raised fee.

Right - that's why I'm curious to know if, say Fidelity, for example, has returned everyones shares.

 

[pz1975]

Ha, that seems so long ago! I bought them back at various times for a slight profit before and after the privatization was cancelled. Would have actually made pretty decent gains if I'd waited until the SP dropped to 250. But I got some calls down there, so all good.

My only remnant from that fiasco is a Jan 20 420 put I sold (cash-secured) that I refuse to close out at a loss.

I’ve got some of those puts too ($400s and $420s). I’m stubbornly going to wait until expiration because I am confident they will expire worthless.

 

[EVNow]

I’ve got some of those puts too ($400s and $420s). I’m stubbornly going to wait until expiration because I am confident they will expire worthless.

Wouldn't you be better off buying back the puts - and buying calls with the freed collateral cash - if you think SP will be over $400 ?

 

[lolcat]

How do i know if my shares have been loaned out to shorts ? I just let my shares be in my Schwabb account.