TSLA Market Action: 2018 Investor Roundtable

[Dan Detweiler]

Anyone else find it ironic that shorts and media are saying Musk can't get/couldn't have gotten/doesn't have funding to do this, when previously they claimed that the only thing he was good at was raising money.

Yup, and it looks like they are putting their money (or more accurately their clients' money) where their mouth is. When this all blows up in their face I can't imagine the letters to clients that will have to be written to try to justify it.

Dan

 

[Ulmo]

I always thought Apple as a company that melts software and hardware together should jump for real into the much bigger hardware market mobility and bring their ecosystem with them, an electric car with IOS, Siri, and all the other stuff makes perfect sense, that said, I don't see a coherent plan of Apple when it comes to cars and there are no hints that Apple is interested in Tesla.

I think it has something to do with the Saudis

It seems that the Saudis wanted to buy primary newly issued shares from Tesla and Elon was not a fan of it and let it pass (btw. another example that the short thesis Tesla can't raise more money it nuts). There are now two possibilities why he was not a fan of it a) he had no interest to unnecessary dilute the stock but was interested to get the company private and he found with the Saudis finally the heavy pockets to do it b) after Musk found out that the Saudi muscled their way in the stock anyway he thought **** this I go private.

I agree. This is what I have been thinking ever since months ago I read the tea leaves that I saw MbS's jet fly overhead my workspace and I wondered "who the heck is THAT?" and found out a week later after he left (met with Apple CEO April 6, 2018). I thought "why didn't Elon take that opportunity?" I assumed it was an offer on the table at the time. The SA 200GW solar project was announced about that time period too on March 27, 2018 (the timing of that suggests that the Silicon Valley visit was after, but since we don't know how or when these discussions went, I couldn't venture a great guess on timing). There was serious worldwide movement going on in that area, and Elon seemed either disinterested or unaware. Or maybe Elon was simply looking for a better deal. (Or even Elon was part of the master planning of all of it at some level.) There are real issues at play that are obvious to the players but would take those of us on the ouside a bit of looking at to properly recognize and weigh. True for the insiders as well.

This turn of events with the under 5% stake by the Saudis is probably what spurred Elon into action, one way or the other, like "Yes, I'm on board with MbS, converting the oil world into electric is exactly what I want" or "heck no, I don't want OIL companies owning an Electric car company" or something of the sort. As KarenRei points out, it technically could be considered a hedge, and "neutrally" financially it would be looked at from the point of view of what has the better outcome, and that doesn't guarantee a better result for transition to cleaner energy. Having more flexible options in a region of the world where oil is a big concern seems like a no brainer from the point of view of SA. I propose that it can be directionally good for Tesla, since MbS is directional in a lot of things right now. What "directional" turns out to be is the finer bits of it all, which matter a great deal as far as Elon is (and from his point of view should be) concerned.

 

[CuriousSunbird]

I'm sure the shorts think we are fanatics and crazy to not think the company is going bankrupt

I think the bankruptcy story has been overtaken by more immediate events.

 

[Dan Detweiler]

I'm very surprised it has not marched to 420. Is investor confidence shaky a vote to privatize would pass? Or dubious about the "secured funding"? Or both?

My guess, and it is only a guess, is that it has a lot more to do with funding doubts than a "no" vote.

Dan

 

[Dan Detweiler]

I think the bankruptcy story has been overtaken by more immediate events.

FUD of the day. Whatever will get more clicks.

Dan

 

[mongo]

BTW., the shortable shares pool on IB has increased to 450,000 shares, up from 250,000 earlier in the day, so a certain amount of short covering appears to be going on.

Could it also be there are now more people with active margin accounts ?

 

[CuriousSunbird]

Yea. People keep talking about a leveraged buyout. I don’t think this is a leveraged buyout.

I agree. If there was leverage we should know about it by now. I worked on the RJR deal and the debt was the first focus.

 

[The Blue Owl]

He is good at raising money. But persuading people to lose $70 billion is a different league from persuading people to lose $9 billion.

You guys only stand to lose $13 billion. You'll be fine.

 

[mongo]

You guys only stand to lose $13 billion. You'll be fine.

If the deal goes through, the buy price has a floor, but the sell price has no ceiling...

 

[The Blue Owl]

If the deal goes through, the buy price has a floor, but the sell price has no ceiling...

Oh, right. That's how he got to $70 billion. My bad.

 

[Fact Checking]

I think the bankruptcy story has been overtaken by more immediate events.

Oh, the bankruptcy story is still very much there: the impending bankruptcy of the shorts, happening over the next couple of weeks and months. It's the story of the year!

 

[Johan]

You guys only stand to lose $13 billion. You'll be fine.

What's a billion here and another billion there, right? Isn't the English proverb "Throwing good money after bad"?

The Sunk Cost Fallacy

The Psychology of Doubling Down – MEL Magazine

 

[CuriousSunbird]

Deep out of money Put premiums have actually increased. Why not just sell these PUTs?

Technically, it's a vol increase outweighing the underlying.

Practically, either Elon has done something nobody else thought was possible, or he's gone crazy - so a binary trade.

 

[CuriousSunbird]

You guys only stand to lose $13 billion. You'll be fine.

Many of the pro shorts are hedged by the convos. Many of the rest of us are hedged by put spreads or similar. Very few sensible investors would trade this stock unhedged.

 

[Fact Checking]

You guys only stand to lose $13 billion. You'll be fine.

Actually, if the TSLA price spikes to over $1,000, similarly to what happened in the Volkswagen squeeze of 2008, and if we assume an average short position entry price of $242 (as per S3 Partners), then shorts will lose $26.5 billion dollars.

But note that the Volkswagen event happened at a lower short interest (15%), and lasted only a couple of days. The Tesla event could eclipse the Volkswagen event: a spike to $2,000 would cause the shorts a loss of $61.5 billion dollars.

If the price spikes to $3,000, then the mark-to-market losses of the shorts would be $96.5 billion dollars: higher than a full buyout of Tesla at $420 would be.

Very few shorts will have the collateral and the margin levels to survive a bigger spike, so the losses will probably be lower - but the losses of the shorts are literally unlimited.

 

[The Blue Owl]

Many of the pro shorts are hedged by the convos. Many of the rest of us are hedged by put spreads or similar. Very few sensible investors would trade this stock unhedged.

In other words, it'll be short-eats-short out there.

 

[CuriousSunbird]

My guess, and it is only a guess, is that it has a lot more to do with funding doubts than a "no" vote.

Dan

You are very right.

 

[N5329K]

Oh, the bankruptcy story is still very much there: the impending bankruptcy of the shorts, happening over the next couple of weeks and months. It's the story of the year!

While I don't have much sympathy to spare, I do find it sad that there will be many shorts who followed the advice of the Very Loud-Mouthed Shorts who, while they will lose (other people's) money, likely protected themselves by making the appropriate opposite bets. Their followers not so much. Pigs get slaughtered. What's the equivalent maxim for willfully ignorant shorts?
Robin

 

[Cosmacelf]

Yea. People keep talking about a leveraged buyout. I don’t think this is a leveraged buyout.

Yeah, leveraged buyout means Tesla would have to pay oodles of interest every quarter. It is already paying a lot of interest, piling on more debt would be sketchy. I suspect the investors to take this private will be in this for the long haul and not require interest or dividend payments. Similar to SpaceX.

Do we know yet who the private investors are that want to pay $420 /share to take Tesla private?

No.

 

[Moderatefan]

My guess, and it is only a guess, is that it has a lot more to do with funding doubts than a "no" vote.

Dan

At this point, once more info came out since the yesterday's tweet it should be obvious that he's dead serious and the funding is there for $420. Also, vote should be a formality.
The only question mark is any lawsuits that'll be filed and to what degree that may be an obstacle. That and whether SP rises too much above funding levels.