Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[StarFoxisDown!]

Ok if this is a stock split dividend, does it have any implications tax-wise for tesla shareholders?

 

[woodisgood]

This might get ugly...

Beauty is in the eye of the beholder.

 

[Runarbt]

"Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020"

What happens between Auf 21 and Aug 31? Why should I buy TSLA on Auf 22 for 1500 if I'm not eligible for the 4 shares of dividende?

You dont. SP will be 1/5th at open 22.aug

 

[Favguy]

This must be the worst day in shorts history...
Shorting in effect increases the float. Say Tesla issued 200M shares, and 10% of them are now shorted. The float is thus 220M.
Tesla announces 5:1 split in a form of a dividend so it issues 4 shares for every existing one: 4 x 200M = 800M new shares.
But the float is expecting to receive 220x 4 = 880M of new shares. Where will those missing 80M come from?
Tesla did not issue them, shorts will have to use magic or buy them on the open market in the next 10 days.

This might get ugly...

You mean it might get beautiful!

 

[SoGA Fan Club]

I will say this - all things being equal (which obviously they are not at this point), Tesla will not be able to compete with Lucid if they continue to build cars in Fremont. Lucid is building their factory in Arizona I believe. As Elon stated a week ago, California workers have a sense of entitlement, and they simply don't have to work very hard (always some type of gov't safety net to catch them and they know it). Not to mention the higher labor costs. So, it's going to be hard for Tesla to compete in the long run if they continue to build cars in California.

There's no way Tesla could sell the CyberTruck at its stated prices if it were built in Fremont. I'm really anxious to see what happens to the price of the Y once it is being built in Texas. The paint quality will at least improve by a large amount.

I'm thinking I made a lot of California people mad with this post.

Why come y'all don't ever get mad at Elon when he says the same thing?

 

[jerry33]

Ok if this is a stock split dividend, does it have any implications tax-wise for tesla shareholders?

Not until you sell your shares (unless the dividend is a cash or share type, which this one isn't).

 

[MP3Mike]

So it seems like the difference is how shorted shares are handled. Assume you have someone that loaned one share before a 5:1 split.

After a normal stock split they have now loaned 5 shares. (The shorter is now short 5 shares.)
After a dividend stock split they have loaned 1 share and hold 4 shares. (The shorter is still short 1 share but had to deliver 4 to the lender.)

If that is correct, this seems like it could be a burn for the shorts, unless they can easily borrow 4 more shares, pre-split, to deliver to the original lender. (Which they would have to borrow between 8/22 and 8/27.)

I wonder if this is essentially the only difference between the two types of splits. (Well and the accounting Tesla has to do for the dividend.)

 

[woodisgood]

So it seems like the difference is how shorted shares are handled. Assume you have someone that loaned one share before.

After a normal 5:1 split they have now loaned 5 shares. (The shorter is now short 5 shares.)
After a dividend stock split they have loaned 1 share and hold 4 shares. (The shorter is still short 1 share but had to deliver 4 to the lender.)

If that is correct, this seems like it could be a burn for the shorts, unless they can easily just 4 more shares, pre-split, to deliver to the original lender.

If this was engineered to burn the shorts, I think we can all thank Hiro.

 

[ggr]

I didn't say it - Elon did. Be mad at him. I've never been to Cali and don't run a business there, so I don't know. I was just going by what the guy who employs several thousand workers there stated. I sure haven't seen Tesla or SpaceX build a massive factory in California to leverage all those hard workers you speak of. Insulting or not, I'm just stating facts.

Oh, and I agree with you on the union workers comment. That's why Ford and GM are struggling so badly. But, where is it that BMW, Nissan, Kia, Mercedes, and many others have built their plants in the U.S? Hmmm. Not in California. Just another fact.

SpaceX's factory is in CA, at Hawthorne Airport. About 6 miles from LAX. Please check the facts you are stating.

 

[Knightshade]

When somebody "borrows" 1 share to short TSLA, that share they "borrowed" will get 4 extra shares so IMHO they have now effectively "borrowed" 5 post-split shares each worth the post-split 1/5 price on the effective date. Someone please correct me if I am wrong...

Ok, you're wrong.

Shorts don't get dividends. They owe them.

The share that "gets" the 4 from Tesla is the one they sold to someone else

The guy who lent his share no longer is the holder of record of it- he gets nothing from Tesla for it. But he's owed 4 shares, RIGHT NOW (well, right on dividend day) by the shorter.... and then still owed back 1 share whenever the short chooses to cover.


None of this happens in a normal split.

 

[Christine69420]

How this will affect the shorts is way over my paygrade.

But my European head will get a short night of sleep tonight.

 

[ZeApelido]

Maybe @anthonyj nailed it. Musk said stock price is too high, not that Tesla is overvalued.

Stock split imminent?

Nailed it.

 

[JustSaying]

This is extremely helpful. So options holders are ok, but those short the stock still have to provide the dividend in the form of shares on August 31. They would like to hope those shares are available at 1/5 the price, but they may or may not actually be available at the price on the 31st...

"So options holders are ok, but those short the stock still have to provide the dividend in the form of shares on August 31. They would like to hope those shares are available at 1/5 the price, but they may or may not actually be available at the price on the 31st..."
Wow! Is that the short burn behind a "stock dividend" vs a stock split?

 

[rallykeeper]

So it seems like the difference is how shorted shares are handled. Assume you have someone that loaned one share before a 5:1 split.

After a normal stock split they have now loaned 5 shares. (The shorter is now short 5 shares.)
After a dividend stock split they have loaned 1 share and hold 4 shares. (The shorter is still short 1 share but had to deliver 4 to the lender.)

If that is correct, this seems like it could be a burn for the shorts, unless they can easily borrow 4 more shares, pre-split, to deliver to the original lender. (Which they would have to borrow between 8/22 and 8/27.)

It's been a while since I last refreshed on this, but I'm fairly confident there is no effective difference between a normal stock split and a dividend stock split -- it's just semantics and mechanics based on the state of incorporation.

Apple and Tesla are different because they are incorporated in different states.

Apple is a California corporation and the California corporate code directly contemplates stock splits. In other words, you don't need to "dividend" out the extra shares.

Tesla is a Delaware corporation and it mechanically requires a dividend to implement a stock split.

That's it.

 

[Nocturnal]

It does seem like this will totally screw anyone short Tesla. The crying will be epic. Couldn’t happen to a worse group of people.

Stock Dividend vs Stock Split | Top 6 Best Differences (with Infographics)

I’ll be wanting my gold trimmed red short shorts now Mr Elon.

 

[Jack6591]

Well, I believe congratulations are in order...

 

[engle]

So if the split triggers a price rally would that happen post split from August 31st?

If so - would this rally be something S&P500 want to be in on - or don't they care?

S&P 500 is just an index product representing those 500 companies licensed to its users. S&P is not "in on" or "out on" it.

 

[ABCTG]

This will be good for future ITM long term call options, could exercise 1 and cash out 4, for example.

Anyone who has stop loss orders (I never use them) may want to adjust them if the brokerage doesn't do that.

 

[Sofie]

You dont. SP will be 1/5th at open 22.aug

does this “Dividend” mean I still have the same number of shares after the split or do I have 4 times my amount now like most splits? I’m confused as to the dividend language here.

 

[willow_hiller]

It's been a while since I last refreshed on this, but I'm fairly confident there is no effective difference between a normal stock split and a dividend stock split -- it's just semantics and mechanics based on the state of incorporation.

For the average shareholder, the net effect seems the same. But there definitely appear to be some mechanical differences for derivatives, accounting, (and potentially short sellers).

My understanding is that under a 5:1 stock split, you receive 4 additional options contracts for each 1 you presently hold. But if the Fidelity guidance I linked above applies to this situation, a 4 share stock dividend reduces your option strike price by 80% and represents the original shares plus the dividend shares while you hold the same number of contracts.