CEO goes nuts, spaghetti-code algos & consensually hallucinating humans lap it up.
“Am considering taking Tesla private at $420. Funding secured,” tweeted Tesla CEO Elon Musk this morning.
Anyone can tweet anything, as we have seen. Even Musk. Two days ago, as part of his personal battle with short sellers, he’d tweeted, “Dang, turns out even Hitler was shorting Tesla stock.”
Tesla has lost money every single year over its decade-plus existence. The more it sells, the more money it loses. It has successfully proven this maxim over and over again. In Q2, total revenues surged 43% from a year ago, but the net loss skyrocketed 113% to an all-time record of $718 million.
Tesla’s global market share in Q2 was 0.2%. This is practically nothing. It gets lost as a rounding error. Tesla is a niche manufacturer that is trying to elbow its way into mass-market manufacturing, with cars that cost over $50,000, hahaha. But it cannot get its manufacturing operation and supply chain to function properly.
Tesla will need huge amounts of money – billions a year – to keep up this charade. As in the past, it will have to ask investors for more money, either by selling more shares or by issuing more debt, plus asking its customers for free unsecured loans (deposits, of which it now owes nearly $1 billion).
Asking for money by selling shares and issuing debt is a heck of a lot easier if the company has grossly over-valued publicly traded shares – than as a private company. By going private, Tesla, which is junk rated, would have a harder time to access the large amounts of cheap capital needed for it stay alive.
And yet, its going-private market cap, at $420 a share, would be about $72 billion. A buyout at this price would be nuts. If Musk wants to buy out all shareholders other than himself (he owns about 20%), Tesla would have to borrow somewhere near $57 billion, on top of the $14 billion in debt that the company already has. It would be the largest leveraged buyout ever. It would beat Dell’s LBO, and the prior record holder, TXU, which went bankrupt. With this amount of debt, and with its losses and perennially negative cash-flows, Tesla would head into bankruptcy court in “ludicrous” mode acceleration.
It’s OK for Musk to invoke Hitler and going-private in his tweets. He can tweet whatever he wants to. But here is how a rational market would react: a hard sell-off because a crazed CEO is a scary prospect for rational shareholders. And they’d pressure the board to scramble him out of there.
But this is not what happened. What happened is that shares (TSLA) soared $25, or over 7%, before trading in them was halted. And when trading resumed, shares jumped further, and closed up $37.91 or 11% for the day, after having been up 12%.
This confirms that the market and its participants – algos or humans – are eager to be led around by their collective noses with the hope that this will make them money. Nothing else matters. It’s a form of consensual hallucination – the belief that if everyone does the same thing together, it’s going to work out.
With this utterly irrational behavior by spaghetti-code algos or consensually hallucinating humans, any vague notion of fundamentals has been completely abandoned, years ago.
That’s why for quite a while now, I’ve warned readers not to short these shares – or any of the other ludicrously overpriced shares. Because when something is idiotically and irrationally overpriced, there is by definition no longer a rational limit of how much further the shares can rise.
With Tesla, there is an additional factor: The unpredictable and often silly personality cult around Musk and his efforts at share-price manipulations via Twitter and other venues that spaghetti-code algos and consensually hallucinating humans lap up and use as fuel. By definition, once a CEO goes this far to say crazy manipulative things, and the market goes this far to eat up this stuff, there is no telling what the next crazy thing will be.
And this was proven this morning with Musk’s going-private tweet.
Tesla’s market cap has completely disconnected from any sense of reality years ago – whether $30 billion or $72 billion makes no difference. On a fundamental basis, compared to market cap, Tesla is the most obvious short out there. But that makes it the most dangerous short.
Short sellers are betting against an entire market that has gone nuts. And there is no telling how much longer this market will be nuts, and how much nuttier, so to speak, it will still get. Eventually, some short sellers will be right, but until then, this irrational market will crush their analyses and logical thinking with even more irrationality.
SEC, are you checking into this? Read… Tesla Discloses Worst Quarterly Loss Ever, But Where Are the 17,000 Model 3 Cars it “Produced” But Didn’t “Deliver”?
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After reading about “virtual real estate” in one of Wolf Street’s postings recently, nothing surprises me anymore.
What shouldn’t Musk take his company private at $420 per share (hmmm, that number 420, is that just a coincidence?).
Pretty sure 420 *is* the joke that Wolf missed because he’s not used to these levels of, ahem, eclecticism from a public company CEO.
I think old MElon head suffered auto-correct on his tweet. He really meant: “Am considering taking Tesla private for a Four’N Twenty” – which is Australia’s most famous meat pie, usually consumed with lashings of tomato sauce (or ketchep) at the footy. That would be a fair off-market trade.
If his comments were issued for the purpose of moving the price of the stock, that could be manipulation, it could also be securities fraud,” former SEC Chairman Harvey Pitt told CNBC on Tuesday.
Good to see that the once and future mind-readers at the SEC are on this.
I needed a laugh today; thx, all.
‘Tesla shareholders who sell if Musk takes electric-car maker private will be big losers for one reason: A.I.’
This is the head on a CNBC piece. A funny read.
The AI buzzword (40 years old) ranks up there with blockchain as away to juice a stock.
Among a whole bunch of hype/bla the writer notes that T uses radar, not lidar to ‘reach a better price point’
Apart from the fact that this has nothing to do with AI, it also means if a biggish piece of aluminum foil blows in front of the car it will slam on the brakes.
I realize the piece is not an editorial (it’s by an academic of something) but you would think CNBC would be a bit cautious about an unalloyed puff- piece on company that has to answer questions from the SEC about the most bizarre announcement
from a major public company in at least this century.
For a read with more explanation see today’s (10 th) Globe and Mail on why to absolutely avoid Tesla stock.
Auld – I just had to look it up..
alex in san jose AKA digital Detroit,
No, it’s this “https://en.wikipedia.org/wiki/420_(cannabis_culture)”
I think Musk had to be making a pun (perhaps he just finished smoking a big one) when he suggested “taking his company private at $420 per share.”
This article is a day late for me. I put my entire net worth including mortgaging my San Francisco Home and my San Jose car and put all on Tesla puts that expire in 8 more days on August 17, 2018. I am actually ruined as I write this. I look for TSLA to exceed $420.00 per share and hang out there for a few weeks after all of my options expire. I am over 60 years old and will have to start all over again. The first thing I will do is move to a State that has a minimum wage of $15 and a plush welfare system, as I have no job skills. There are many States where the Federal minimum wage of $7.25 still reigns supreme. California’s minimum wage is only $11.00. I remember reading about never placing everything you have on a binary outcome like red or black on a roulette wheel, but unfortunately I forgot about it as my greed to make it big fast overtook me. Yes, I will find a State that also has no income tax and no sales tax along with, as I already stated, a $15.00 per hour minimum wage and maximum health and welfare benefits. If I can make it there, I can make it anywhere.
Maybe you’ll be OK in a few days.
Lol. Good one!
You be back in a few decades.
This guy! So funny. ;)
Never bet against Musk.
Tell you where you went wrong, options. Whatever position you have that should be your core position, you only use options to hedge your core position. So you short TESLA stock and you buy calls. Options always expire at the wrong time. High profile short sellers like John Chanos, he shorted CHINA, usually focus on fundamentals, balance sheets. Suppose you think the hydrogen car will replace the electric car, at half the cost? Maybe TESLA is the eight track tape of the car industry? Nothing wrong with shorting TESLA, just the wrong reasons, their balance sheet, (who cares really?) or emotions, which say Musk is a fraud. Finally you want to know if the underlying market with with you or against you. Right now yes and no. Meanwhile high yield corporate debt HYG, is making new highs.
Joan of Arc- I think you missed you calling. You should write fiction novels.
Her work is already in the humor department :-]
I posted the title of WR’s previous piece on Electrik (aka: the Tesla newsletter) and they replied he must be short.
I said he’s said: ‘never short’ but they think he’s a secret short.
Moving on: if I wanted to buy a company and take it private, WHY would I take action to bid up the shares?
Ding ding ding… we have a winner!
Thank you Wolf for the sane opinion – I couldn’t believe it when I saw it – this is really proof positive of how truly insane things are now.
For all readers, consider how many people/investors/algos lost a TON of money on the most shorted stock on complete BS.
This isn’t an accident.
There are no laws … well, there are laws, but there are no enforced laws in investing anymore.
Everyone out of the pool!
Oh, there are laws, all right.
It’s just that the law, like taxes, is for the little people.
He could have picked the number based on an engine size like the Beach Boys song 409.
Today ( 9th). 10 % Pop from- take private BS all gone. Thousands of schmucks have lost millions.
Class action law suit next.
Trump and Musk would be SOOO much better off without Twitter.
But at least T can plead stupid.
This is a good lesson in international capital flows. The fundamentals say *short TSLA*. The operating income says *short TSLA*. The American financial press says *short TSLA*. Saudis cough up $2 bn and the lifeline stretches to infinity.
The Saudis acquired the shares in the secondary market. This means they bought them from existing shareholders that wanted to sell, and those sellers got all the money. Tesla didn’t see a dime of this money.
Insiders who are out-of-the-money want out … that is all this is about. If the volume wasn’t good enough, expect more BS with no consequences.
How, When and If this insanity will end?
How, If at all can one profit from this insanity?
Since the night is darkest is the daybreak nearer?
“Since the night is darkest is the daybreak nearer?”
Well yes, but I think Wolf’s point is we have no idea how dark this night can get (as it has detached from any rules or sanity), and thus how far away daybreak may still be despite us being a little closer to it now.
Have you tried being an insider? Tends to work.
Oh, you aren’t? Well, do something productive and convince someone to pay you for it – someone has to run this farm.
Best of luck!
Where the hell is the SEC in all this? And that goes for incredibly conflicted Solar City acquisition.
The SEC is either criminally negligent, or criminally complicit with the Wall Street grifters. This most singularly worthless of regulators doesn’t even pretend any more to safeguard the public interest or oversee the integrity of these rigged, broken, manipulated “markets.”
You can bet there are plenty of guys at the SEC hoping to get lucrative jobs at whatever investment bank is receiving fat commissions for selling Tesla debt. Anyone, at the SEC, who dare suggest prosecuting Musk for manipulation would be black-balled and shunned by Wall Street and could never receive that lucrative (quid pro quo) job offer. One hand washes another.
Corruption is contagious and it spreads as fast as any viral epidemic – the U.S. is experiencing a severe outbreak.
Ex Fed Head, Ben Bernanke, works at a high frequency trading firm!!!! Quid pro quo. You can’t make this stuff up, truth is truly more shocking then fiction
True dat Mr. Van-man. The SECis just a box of Muppets who squeak on command when the investment bankers slide their hands up their asses and make their mouths move. Some of the worst paddlings of the investment bankers have been delivered not by the SEC but by politically ambitious DOJ & New York State prosecutors. The SEC has a revolving door between the brokerage firms & investment banks; why blow the chance at a good living by skewering your future employer? It must be a Kafkaesque Hell to be an honest, commited civil servant working at the SEC.
SEC… can stand for Scrutiny Entirely Comical. Is that it?
The SEC just busted one of the GOP for insider trading, but it’s like handing out speeding tickets at the INDY 500. Inappropriate touching is the real high crime in this society.
Peter Strzok’s wife runs the SEC. Yes, you read that correctly. The GOP Congressman in question actually lost $16 million on the “insider trade” he’s accused of.
To say that the charges are politically motivated would be the understatement of the year.
Wait till he tries to roll Space X into this as well.
The only reason this speculation frenzy continues is support from corrupt central banks that are rewriting your social contract. The motto’s are: Hard work doesn’t pay, take on debt till you default, what goes up must stay up.
If central banks quit supporting irrational and damaging behavior, it would end.
Fed is (and has been) unwinding as we speak…
Yep. But the market is still going up. Let’s see what what they do when
it starts to fail in a big way.
Only because they’ve lost the ability to use monetary policy to move the needle of the market. There will be another bail out as soon as it gets real.
About 30 years ago I read Trump’s book The Art of the Deal. Somewhere in that book Trump talks about how he one day got the word out to the public early that he was eagerly buying some particular stock. The stock surged on the news and Trump sold out the shares he had already owned at the end of the day for a profit of I believe $1 million.
Musk isn’t a moron who has no idea what he’s doing. He’s actually doing exactly what one who is familiar with the history of America and capitalism should be expecting. Musk isn’t planning on buying shareholders out at $420 per share. He’s selling to the chumps. That’s capitalism. Musk will be president of the US in 30 years.
Have researched your statement ‘… Somewhere in that book Trump talks about how he one day got the word out to the public early that he was eagerly buying some particular stock. The stock surged on the news and Trump sold out the shares he had already owned at the end of the day for a profit of I believe $1 million….”.
Can’t find the relevant statements on-line – could you please provide a page number for the statement?
Luckily he’s a South Africa native so the last sentence won’t be true…. at least I hope that’s the case.
Haha. Maybe you weren’t alive from 2008 to 2016?
Musk might produce a birth certificate like this….
(skip forward to 1:50)
Clearly the true believers would have no problem with it.
Most folks I try to show these BHO birth certificate videos to, simply will not look at them.
This is NOT made up. This is the actual file that the White House put up and had up for years. Maybe its still there.
Jessie Livermore – Reminiscences of a Operator of a Stock Market
Google for the PDF, it is an autobiography. Constantly re-posted all over, be patient or pay for it.
Nothing has really changed, just a fat layer of technology on top of the same old story.
Personally I have been in MM for years now (big fat wad) waiting, just waiting – for this thing to face plant. In the mean time, I am actively investing in skills that make me unique and valuable.
Places, and posters, like around here, help keep me socialable. :-D
Tick. Tock. Tick. Tock.
“Anyone can tweet anything” — but not necessarily without consequences:
Tesla’s Elon Musk just invited a big lawsuit | Yahoo Finance
Article mentions Saudi SWF bought $2 bln in shares … only $70 bln to go! But, much as I hate to say it, echoing Wolf, in the context of this kind of extreme cult-and-asset-bubble mania, I wouldn’t put it past the Great Cult Leader to have actually line up a sufficient amount of sucker money to keep the SEC wolf in its usual year-round state of hibernation.
Was going to say the same. Sounds like stock manipulation and fraud to me.
Stock manipulation and fraud is the new normal, while the SEC slumbers on.
Stock manipulation is REQUIRED for our entire economy to work. What do you think the Central Banks have been doing since 2009?
Here is the thing I think is really curious (am over my post limit for sure).
Historically speaking, insiders can game the system and essentially leverage asymmetric information to profit. Insiders know it is (or isn’t) a turd, and bet accordingly. With enough sales peckers pushing (or pulling) any particular book, it works.
But that volume of pushing (or pulling) is important as it makes it work for insiders.
I sort of wonder if there are many, many people like … well, me … that got F****ED good and proper back in the day (late 90s), and again, good and proper not so long ago in the aughts (’07/08), and frankly I am not stupid anymore – despite having the pockets.
If you run up the ticker, at the end of the day, someone has to buy. I sort of feel like that has been the deal for a year or two or more now. They run it up, but there aren’t bag holders – just buyback after buyback after buyback, but no bag holders are showing up.
Who is the real buyer in any volume? What generation? Boomers? Are you F***ing kidding me? Their kids living in their basements? I moved out (at a young age).
Ain’t. F****ing me. I need blood and guts in the street, then MAYBE, else, no thanks.
To be clear, I don’t want war – but I will not get back in until there is a truly punishing correction. A nice 40% 50%, 60%, 70% – don’t give me a hard on percent – I might come out of my cave (that I am providing thank you). Otherwise, I am fine with my cave and ZERO percent.
F*** you and your arguments to the contrary.
Good luck guys with your algo’s and fancy models, you ain’t sellin’ to me!
Question: if Musk succeeded in taking Tesla private at $420, would that give him a defense to the various shareholder suits he’ll otherwise be facing? The “everyone made money, so no damages” defense?
Defense didn’t work for Martin Shkreli
He can’t close it at 420. It is total BS. There are no laws (that are being enforced, nor will be).
This is a top.
Patience. When the short is ready it will happen organically and although you won’t make the windfall of someone who happens to time it right, there will still be plenty of fish in the barrel who will hold their shares until the bitter end.
I also agree his statements could easily be construed as market manipulation. First thing the govt should do is end all subsidies and then throw him in jail or lock him in one of his self-driving death traps.
My guess is out of business in 5 years or whenever US enters into a recession.
Huh? “…When the short is ready it will happen organically and although you won’t make the windfall of someone who happens to time it right…” – are you kidding? There’s PLENTY of short money to be made from $320 to (close to) zero.
I used to think the desired end-game was to sell Tesla to some auto major. So much brand damage has been done that “selling” may no longer be possible.
So, Tesla has about the same market share as, say, Ferrari or Maserati, but it doesn’t seem to know how to manufacture? I don’t think I would buy or short that stock.
Reason: I’m more interested in the return OF my money than the return ON my money.
I am just amazed that institutions aren’t quietly lightening their portfolio on this stock. This is essentially a game of musical chairs and seeing who is the biggest sucker holding the bag of crap at the end. In the interim, shorts get killed, until one day when they are right.
Tesla is starting to feel like more and more like Bitcoin, I am wondering when Elon is going to announce the Tesla blockchain. As in, you need the block chain to authenticate that you are the owner of the car before it starts. It’ll be a security feature… may be the car will start right away, may be it will start in 5 hours.
Ok, think I will Short this thing, I mean what could possibly go wrong.
Tesla is the most shorted US stock at 25% of total shares and almost all lendable stock has been taken.
Less exciting plan B: buy a Tesla put; amazingly, a Jan 18, 2019 (170 days away) $350 is only $55.
Seriously, I wouldn’t touch this stock under any foreseeable circumstances.
I can’t make sense of this, besides no longer needing to be as transparent what does Tesla gain from doing what amounts to a gigantic share buyback program?
Isn’t this manipulation? Where is the SEC?
Just kidding. ROFL.
Shorting single stocks is subject to “single stock risk” just like going long, except the risk is even greater. The “story” with a given single stock can get crazy, as we see with this.
I also have some wounds in this area. Shorted some things that ended up losing 90%+, but was too early. The financial structure can be propped up by lots of entities.
Shorting indices is probably less risky, but is a “macro” play, requiring attention to different variables.
I hope Musk is readying a really big vat of Kool-Aid–they’re going to need it when the SHTF. You first Elon.
I was hoping somebody could shed some light on why the stock price did not hit 420$ once the trading was allowed later in the day.
Arbitrage logic dictates that since Musk is guaranteeing a payout of 420$ per share and he’s willing to buy them all at that price, a seller should immediately ask for 420$ for each share. Yet, the close was ~380$ and the high in the day was 386$. This means the price went up (but nowhere close to 420$) and then fell.
Does this price differential reflect the probability the market has assigned for his statement to be false?
From what I have seen on other companies going private, if the stock hits that far below the buy price, the market has doubts if the deal will happen.
It didn’t hit $420 because the serious money didn’t take Musk seriously.
There is no financing to do this deal. To line up tens of billions of dollars to do the largest LBO ever you need big banks involved.
So Jamie calls up Blankfein, who gets on the speakerphone with the next CEO Solomon, and they as they listen to Jamie, they look at each other shake their heads. “Never heard anything,” they tell Jamie. So they call around. Soon they realize that no one big enough to sell tens of billions in debt knows anything about this. So they blew it off as part of Musk’s tweet chaos. And they told their arbs to stay away from it – that it wouldn’t happen.
This is a mind-deal, as we used to call it in the car business. It’s not happening, and the serious money knows this.
“There is no financing to do this deal.”
If there is truly no financing to do the deal, he’s almost unquestionably committed securities fraud. Fake deal with a fake price? This isn’t a “Hello, SEC, are you paying attention scenario.” There’s no way they could ignore that.
I know you hate Tesla and Elon Musk, but I’d be a little surprised. The Tesla board says they have indeed had conversations about going private and how to fund it– obviously that’s a far cry from “funding secured” but assuming he blatantly committed securities fraud is imo the more unlikely scenario here.
I don’t “hate” Tesla. I thank Musk for having made EVs cool and having put them on the map. That was a huge accomplishment, and the credit goes to him. The Model S is a good luxury car. I like EVs. Our next vehicle is going to be an EV – but not likely a Tesla.
I just think that the share price is ludicrously overvalued. I don’t blame Tesla for that, but the markets, as you can tell from my article.
I do think Musk is a loose cannon, and he is a master manipulator in part because he has many, many avid followers who WANT TO BE manipulated, including among institutional investors that have funded all this and that now have a lot to lose, and they’re all trying to keep this share price up.
Over the past few years, Musk has tweeted many things that were just BS, designed to boost the share price. And no authority has challenged him on it yet.
I have no opinion on whether or not he committed securities fraud just because he tweeted “funding secured.” Regulators have ignored his prior tweets — and they and the courts are the ones that determine what constitutes securities fraud.
My gut feeling is that regulators will do nothing until the shares collapse. Then the legal nightmares will come out of the woodwork from all sides.
UPDATE: The SEC is “inquiring”…
The SEC’s San Francisco office is looking into Musk’s tweet about going private, and whether his claim was factual, people familiar with the matter told the WSJ.
The WSJ: “It wasn’t immediately clear on Wednesday whether the regulator had opened a formal enforcement investigation based on the answers it received from the company. An SEC spokesman declined to comment.”
Wolf and others, thanks for clearing this up.
I mention the Following on another Blog:
1) Mister Musk and TSLA have Cult Followers willing to pour more Money into the Cauldron.
2) He can take it Private or Non-Profit, and/or Take-Over FCAU and make them Roll-out BEV Versions of their Lineup – AND Gain Chains of Dealers in Multiple Countries.
3) Cult Followers and others would not mind holding “Passive Loss Generating Liabilities” in order to make their Financial Statements and Tax Returns look Sexy, Tree-Hugging (instead of GBR Racing) Green, and SJW-Snowflake Friendly.
Of course, some disgruntled Ex-Employees and/or Shorts may try to “Le Chiffre”(Bond Reference) TSLA & SpaceX Plants for the Ultimate Blowback.
I do not recommend Shorting to begin with; and Concur with Mister Richter’s Observations.
The phrase “consensual hallucination” reminded me of another truism I read a while ago: “truth is just agreed upon fiction”. It all depends on how many people believe said “truths”. A huge percentage of the people in the Soviet CCCP and Nazi Germany believed fervently in their philosophies, just as now when speculators believe fervently in the abilities of their “prophet”. What is “true?” : are they right? And under what framework do we judge those “truths?” On a higher level : is capitalism correct?, or is “Gross National Happiness” as implemented in Bhutan a better system? Seems to me that Musk is manipulating a certain system of “truths” very well indeed! And we should be thankful for the glaringly obvious lesson the showman teaches us. The markets (like *anything* involving humans) are not ruled by logic but by primitive emotions [and superstitions].
Your computer wouldn’t succeed in transmitting your thoughts if absolute truth did not exist in some fields.
If you think science is subjective don’t get on a plane.
Your precious butt at 30, 000 feet, at 500 mph? What if they made this shit up?
Sigh… I don’t remember saying that the physical sciences don’t describe certain Newtonian phenomena in a reasonably reliable manner. Why are you so defensive? Ever since money was uncoupled from gold and ever since money became debt (banks “creating” money out of thin air by issuing loans) and ever since the reserve banks started printing money willy nilly, any semblance of a scientifically describable system went out the window. My point is that the “financial system” is now a work of fiction: more subject to emotional forces than logic. Musk is teaching us how divorced from (classical) reason the system now is. I seem to remember Tulip bulbs in Netherlands and The Railroad bubble in 1800’s Great Britain. The fiction is truth until people no longer believe in it, then another “truth” is manufactured to fill the need for an overarching explanatory mythology. Man is essentially a myth maker and sometimes forgets that it was he who made the myths in the first place. Even those who worship their precious Newtonian “science.”
When my wheels leave the ground I want more than reasonably reliable
All science is just models that people have built. They are accepted as explanations when they explain the observations with in an error margin that is deemed acceptable. The models are updated when new observations are made that cannot be explained by existing theories.
In that sense, we can never know the truth unless we have access to all observations. If we had access to all observations made at all times, we cannot build a computer to process all that data. The only computer that can use all observations is called the universe. Since we live in that universe, we cannot process all observations without becoming one with the universe. If we could, the universe would then expand to include us and generate more data that we cannot process. This is why, we can never know the truth.
What we can know is a facet of the truth. All science has a subjectivity that is based on what we think should happen, which in turn is derived from our existing knowledge base. Subjectivity enters when we project our understanding to explain what we cannot explain well. Because of subjectivity, we assign probabilities to outcomes.
Money is made on predicting stuff that has probabilities assigned to it. How we process the probabilities is definitely subjective. That’s where mass hallucination enters.
Who in the world would do a LBO for Tesla and take it private? Without the stock market to monetize Tesla, Musk would not even be here.
I am thinking the market is saying
“Show me the money”
I love pain, so I am going to use puts to short the damn thing tomorrow ;)
Since the SEC, won’t do their job on in regards to false and misleading statements along with blatant stock market manipulation…I wish you luck.
That might actually have a chance of making money — a little money at a lot of risk :-]
Well I am only putting down a 1000 bucks. That much I can afford.
FYI: the Jan 18, 2019 (170 days away) price is $55 for a $350 put (that’s $55 per share), so you could buy about 18..
The $350 Jan 2019 puts are about $30 (the calls are $50).
And those are not “per share.” That’s per contract. Each contract is for 100 shares.
So for $1000, he could buy about 30 put contracts, which would effectively make him short about 3000 shares.
If Tesla went from $370 (roughly where it is today) to $300 before expiration, that would be approximately $150,000 in gains, for $1000 in risk.
Dear Smingles. Nope. The quoted option price is per share. You do generally however have to buy the options 100 units at a time (a.k.a. one contract).
I wish it were the way you say its is. I’d be all over that deal.
I’d guess this is the day trader lemming model. People figure the stock will go up, so they buy, planning to sell at peak.
Once the lemmings start running for the cliff, there’ll be a big fall. I expect it may cause a catastrophic stock market crash, as everyone decides that they’ve reached peak crazy.
I’m curious to see what the SEC does in response to what appears to be blatant stock manipulation. My assumption is Musk is wealthy enough to be a member of the protected class and has nothing to fear. It is interesting to note that Martha Stewart was unable to attain enough wealth to achieve immunity from the law – she was prosecuted and railroaded despite being innocent (of course guilt or innocence are beside the point in a corrupt society).
In the current easy money world, where the Fed still has the FFR pegged under 2% going on 10 years, Musk would have no problem raising 60 billion – just sell some bonds to pension funds – it must be easy to gamble when you play with other people’s money. But he should be sure to raise enough to pay out “special dividends”.
I’m curious to see what the SEC does in response to what appears to be blatant stock manipulation.
Yes, this is blatant stock manipulation, but the SEC won’t do anything. These “regulators” have been completely captured and co-opted by the entities they’re supposed to be overseeing. They don’t even pretend any more to safeguard the public interest or ensure the integrity of these rigged, broken, manipulated markets. Rather, they are there to aid and abet the fraud committed by the Wall Street-Federal Reserve Looting Syndicate.
Martha Stewart line to a federal agent, which is how lots of people get sent to jail. Lt Gen Mike Flynn is in this trap awaiting sentencing now.
The fact Martha had been a stock broker (ie took & passed the Series 7) didn’t help her.
The fact she was a prior stock broker actually hurt her. She sold on inside information, taking profits, knowingly breaking the rules. She could not claim ignorance, and hide behind a pile of freshly baked cookies, or she would have.
She wasn’t convicted of insider trading, she was convicted of lying to the FBI.
Of course Stewart wasn’t innocent and although a mere multi-millionaire, people worth billions have done time. E.g. Milken inventor of the junk bond. Connected politicians have done time including two New Jersey governors.
Stewart’s sell order came minutes after the call from her buddy the CEO.
Phone records establish this.
So when she’s asked about this she can do a number of things. She can BS and say he called because he was depressed, which made me think maybe I should sell.
Smartest would be to say: ‘sorry I didn’t know I couldn’t sell. I thought everyone knew.’ Or something. So the prosecution would have to establish her state of mind.
Cough up any money saved and maybe a ten G fine.
But NO! She has to get clever. Her story is: ‘My broker had an order I gave him months ago to sell if the stock hit X price. He’ll have a record of it.’
And he does, written in pen on her file. File goes to the lab: it wasn’t written months ago, it was written just after she was asked why she sold with such exquisite timing. No longer necessary to establish state of mind.
Obstruction of justice. That’s why she went to jail.
No, the best thing, hard as it might be under the circumstances, is to say nothing.
The rule is, “Never talk to the police.”
If you are or conceivably might be the subject of an investigation, talking to the cops can never help you and can only hurt you.
“With all due respect officer, while I’m sure you and I would have a friendly conversation under different circumstances, I’m going to invoke my Fifth Amendment right to remain silent.”
If you’re wise, that would be the end of the discussion, even if you have to get bailed out the next day.
Silence can’t be used against you, but there’s no telling what a prosecutor who has a hard on for you might do with a simple mistake or mis-statement…
She isn’t talking to police and she hasn’t been charged. At this stage it’s a two- bit deal (she didn’t have a big position) that would most likely be handled at the SEC administrative level.
They only recommend criminal charges in a fraction of the thousands of cases. The deal has to be big enough to warrant a big fine, or else they are wasting their time.
Needlessly acting like an street- wise gang banger is a good way to get your file pushed upstairs.
OK not saying anything is one strategy. But one thing is certain: she is NOT going to get to keep the money.
So if the strategy is pursued at some point charges will be laid because they have no choice. And now the same problem arises in court : How do you explain selling the stock five minutes after the call?
Taking the Fifth again leaves judge or jury with one question, which the prosecutor will ask: is there any other reasonable explanation other than the charge?
Not to defend Martha Stewart, but she was indeed talking with the federal investigators, and that was the basis for her conviction. She was never convicted of insider trading, per se, but rather of committing a procedural violation. It’s essentially the same charge that Flynn is facing.
She might have been, and probably was, guilty of insider trading but her criminal conviction was based on lying to federal investigators. If she’d kept her mouth shut, she probably wouldn’t have gone to jail.
And since when is invoking your constitutional rights evidence of being a “gang-banger?”
I sure hope that you never serve on a jury that must decides someone’s fate.
For those with a more enlightened view of the Fifth Amendment, and how it protects the innocent as well as the guilty, check out this informative and entertaining video clip on the topic: one of the speakers is a law professor/former defense lawyer, and the other is a career detective and investigator who was studying for his law degree.
They both agree that you should NEVER talk with the police if you are or might be the subject of an investigation.
‘Although Stewart maintained her innocence, she was found guilty and sentenced on July 16, 2004, to five months in prison, five months of home confinement, and two years probation for lying about a stock sale, conspiracy, and obstruction of justice.’
ImClone stock trading case – Wikipedia
Obstruction being the one requiring jail.
Duke: let’s end by agreeing she wouldn’t have gone to jail if she’d never spoken. But you want to avoid going to trial, where if she takes the 5 again she is almost certainly convicted. She is unlikely to go to jail, but is she any better off than if she just admits it right away? She isn’t to jail for that either. (since she is a woman of means, let’s forget that a trial would cost her far more than her fine)
And no doubt she should leave that to her lawyer to negotiate, so ok, I agree SHE shouldn’t say anything. I think the SEC will cut some slack if they don’t have to take it to trial.
Yes, I think we are basically in agreement.
My point was that you should never speak to the police/investigators in the initial stages of a criminal investigation, since you have no idea what they have and/or are looking for. You can only hurt yourself, since at trial any exculpatory statements made to the police cannot be used in your defense, as they are classified as hearsay.
Couple that with the fact that police are legally entitled to lie to you in the course of an interview/interrogation, and there’s absolutely no upside to speaking with them. Even the most innocent and honest people can get entangled in legal cases where the prosecution is either mistaken, misguided, incompetent and/or pursuing a political agenda. Even if the chances of any of the above happening are slim (though they’re far higher for some populations than others), why take the chance?
Taking the Fifth during an actual trial, which I was not referring to, is a different matter.
As the defense lawyer in the linked video sensibly asks, “What’s the rush?” If you are under criminal investigation, there’s plenty of time for you and your lawyer to talk with investigators/prosecutors, once your lawyer as gotten a sense of the case and the information investigators are working with.
Personally, I’d rather take my chances with a jury that knows I declined an initial interview, rather than with an experienced, clever interrogator who holds all the cards. In the video, the detective says that in his twenty-eight year career, exactly two people brought in for questioning have single-handedly convinced him to let them go. Poor odds, to say the least…
Once again debt is good, and their
is a ton of interest in one of the worlds top cars.
Rookies still do not get it.
Spoken like a guy with exactly 9 years of stock market experience starting in 2009
Am I wrong?
Stocks have come to fill the need for social drama lacking in people’s lives. They’re buying the story.
Maybe Musk and his employees distracted by spending more time watching their stock than building their cars?
quite truthfully this is something that Musk referenced in todays communications — that folks were too distracted by the stock gyrations to concentrate on the tasks at hand.
My guess, if the “financing secured” was not just complete and total bullshit [and super huge trouble for Musk if it WAS complete bullshit], is who I have been variously bandying about as the stupidest “investment bank/fund/whatever” operating in the world right now — completely beyond the pale of any human decency (purposeful Apocalypse Now reference) ….
one really dumb word: SOFTBANK
The Saudi’s have an interest in Tesla now so he will use them as the straw men in the trade with the SEC then he will “reconsider” and rejects the proposal……hey the Saudi’s already got quite a pop on the tweet already……….and the convertible debt is now in the money and the bondholders can foist the converted shares off on the bagholders at a fantastic profit and Tesla’s debt burden is cut…….then it will be back to the same old shit show as the Tesla ponzi lives to fight another day.
Is there any evidence that an actual offer exists?
Where is the letter of intent? Who is the buyer? Where is the “secured funding”? What investment banks are backing and handling the transaction?
This would be the largest LBO in history. Surely these little details were already figured out before announcing the deal.
I have some vague memories of the movie “Barbarians at the Gate” and the Board of Directors of a public company actually have a bit of say in the matter as to the acceptance/denial of an offer….. Just a little detail that I think got forgotten in the mix….
Musk said that any potential deal would be pending board approval.
The board also confirmed that there have been discussions about going private, and about funding, but they did not say that funding has been secured.
The entire US stock market is built upon fraud and manipulation. And the Central Banks are the biggest manipulators of them all. Once you accept this, the fraud that is Tesla is easy to understand. All of this is necessary for our economy to work. As tens of trillions in wealth is defined by the potential futures value of listed companies.
Your categorical statement “entire US stock market is built upon fraud and manipulation” is categorically wrong. You will be somewhat well served by never investing in the market, but your path to wealth will be restricted to Las Vegas, bank robbery, state-run lottery & the Irish Sweepstakes (oh yea – and the prince in Nigeria).
However, you are correct that there are good guys and bad guys, but if someone looks at Tesla (Uber, Lyft, Theranos, et al.) as a viable investment opportunity, they are a fool (perhaps even the proverbial “greater fool”). One in a thousand goof-ball dot.com pays off (Google, Facebook), the other 999 just consume wealth. Everybody says they know this, but everybody thinks they alone have the gift of identifying the next Google. This isn’t fraud – it fully disclosed and totally legal stupidity (caveat: what Musk did Tuesday certainly looked like fraud/manipulation).
Nothing wrong with taking a small gamble, but don’t dress it up as “investing”. A certain class of people appear to enjoy “investing” in unicorns, leprechauns and the tooth fairy (and then wonder why they’re poor).
Just checked their latest financials on Yahoo Finance:
1. $5 billion Ret Earnings deficit to date
2. Negative cash flow from operations
If a person wanted to take the proverbial flyer….I think this is at best a $20 stock.
Can’t wait to see how this movie ends….but I have a feeling I’ve seen it before…..as Frodo said: “Sam, we’ve been here before, were going in circles….”
“Consensual hallucination” …is that an original? Most excellent nevertheless.
The term was used in a book in the 1980s but in a different non-financial sense. I first used it in 2014, and have been using it occasionally since. This site may have been the first one to use the term for stock market behavior.
Love it. “Consensual hallucination” describes just about all financial markets today. No one wants the free markets to determine value because stocks, bonds, and currencies would be crushed, and the reset would change the world as we know it.
I fail to see how this could be true.
For it to be true the “secured funder” would need to possess two key characteristics:
1. Have a cool $57 bil.
2. Be very stupid.
My money is on The Rich Texan from The Simpsons.
you just described the typical pension fund administrator
You just described SOFTBANK to a T.
Good riddance! Hopefully I won’t have to hear about it on a daily basis anymore.
If serious lenders (of $60 B) looked at the business of Tesla carefully, they will see that almost every established auto manufacturer in the world is producing electric cars that are comparable, if not equal to his three models. This is not cutting edge stuff anymore.
Where is the beef?
Wolf I think you may have missed the meat of what just happened. As I understand it with this tweet musk converted a bunch of debt into stock. The magic $360 threshold for convertible debt was triggered and therefore Tesla de leveraged and converted a bunch of bonds to stocks.
Smart money would be stupid not to convert instantly and sell the garbage stock.
See the prospectus on Tesla convertible bonds. Unless I’m misunderstanding the prospectus the threshold for conversion is $360 not 130% of 360 but that’s a bit oddly worded. https://www.sec.gov/Archives/edgar/data/1318605/000119312514077288/d678614d424b5.htm
There have been several articles stating they are now nicely in the money! With a floor under the stock that they can sell into!…..then Musk claims he has reconsidered and rejects the baloney straw man buyout offer…….then it is back to the same old circus act with Tesla……debt relief, the cronies are enriched again and Tesla gets to ponzi for another few rounds
My reading was that the stock has to trade at 130% or more of the conversion price for 20 of 30 days during a quarter. So, the conversion trigger is at about 468 dollars; if the shares trade at or above 468 for 20 out of any 30 days you then get to convert your bonds to shares at just under 360 dollars a share, or 2.7788 shares per 1000 dollar bond.
So 468 is the magic number for bondholders, not 360.
Stories in the press have implied that bondholders can cash in for a ‘big profit’ if TSLA stays over 360.
Some other mumbo-jumbo in there about if this and that, but I’m tired…
Musk is an expert in raising more and more capital to fund this terminally ill company. He is also very connected, it seems. Many of his business practices and accounting methods would have the SEC at the door of most companies with a SWAT team. He gets a pass on all that. If you short Tesla using any logic or methods that usually work, you will lose it all.
Perhaps the Fed can take FAANG private at current valuations? Then we are back to normal (+/- $Trillion or two).
Maybe the market is really a bought & paid for rent-a-crowd ??
Can anyone tell me- DOES TESLA ACTUALLY MAKE GOOD CARS?
Forget the cult aspect. Is there redemption to be found in the vehicles themselves? Are they easy to maintain, perhaps speedy and comfortable?
The Model S is very good, and very expensive. And it’s getting a little stale.
The Model 3 is a mess.
The Model 3 is an amazing car. My boss owns both a Model S and Model 3 – they are both wonderful cars. The problem is Tesla loses money on every vehicle.
They seem to have a nasty tendency to suddenly burst into flames Other than that they’re great
They should have called it the Model C, C for Crematory.
Or… they should be charging for option C. When their Autonomous Technology murders you, option “C” will automatically cremate your remains at the scene.
The average model S sells for $104,000 to a person with an annual income of $500,000. It is definitely a rich man’s toy.
“It is definitely a rich man’s toy.”
So I guess the rest of us Prolz should be honored to subsidize its cost…
Thank you, Mr. Musk, and please sir, may I have some more?
Of cours is stock manipulation, even Google almost dead electric car division would be better to buy than Tesla.
“SEC, are you checking into this?”
Wolf, that was purely rhetorical I assume. After all, no one can seriously expect SEC to do anything in a rising market and price discovery exist only in name!
Wonder when they are going to call Madoff’s bluff?…
Unrelated perhaps, from Sergio Marchionne in 2014:
WASHINGTON, May 21 (Reuters) –
“Fiat Chrysler Automobiles Chief Executive Sergio Marchionne has a request for potential buyers of the automaker’s Fiat 500e electric car: Don’t buy it. He’s tired of losing money.
Speaking at a conference in Washington… Marchionne said Tesla Motors Inc was the only company making money on electric cars and that was because of the higher price point for its Model S sedan. Decrying the federal and state mandates that push manufacturers to build electric cars, Marchionne said he hoped to sell the minimum number of 500e cars possible.
‘I hope you don’t buy it because every time I sell one it costs me $14,000,’ he said to the audience at the Brookings Institution about the 500e.
…the 500e starts at $32,650 before federal tax credits. Consumers are not willing to pay a price that covers Fiat’s costs so it loses money on the 500e.”
So how will the Fremont genius make money on the 3, seemingly not on the stripped down 35K model?
There’s a sense that we’re witnessing a towering inferno and the leader seems less rational with each pronouncement.
Unfortunately he seems to spray his words around w/o consequence.
Wolf, (and others)
420 is the international number for marijuana, just saying. That may be part of the joke that you have all missed here :)
Just FYI, Elon may have been smoking dope or about to
The advice from WR is good advice. Private or public it is too early for Tesla’s demise. The crisis will hit in earnest if better Audi / Porsche / VW / Mercedes’s hit the road and gain better acceptance. That will take 12-24 months. A top model S or X is USD 150.000.- in Switzerland. On the motorway I overtake them regularly in my old Lada Niva because they are always in the savings mode.
This is interesting…oh the great cult leader and it’s lemmings followers….at this point I am sure no one even cares about any problems with Solar city…
this guy is connected for sure. Dimon and Blakefine are just middle managers who must not have gotten the memo from the real owners. They want electric cars no matter if the tech is not there yet. No matter if it costs a trillion! I agree with wolf. Short this thing if you wish but you’ll have a better time in Vegas.
I seldom own these things because they always seem to have a fundamental flaw. With Facebook that would be the FCC declaring them a MEDIA company, and putting new restrictions on political content, and changing their corporate tax structure. The quant strategy is to own the best and short the worst, and no doubt a lot of that short interest is buyers who have profits trying to lock them in. You buy a put option and the seller then goes into the market and shorts the stock. CEO announces they just colonized the moon, stock goes up, options expire, the seller covers the short. Not everyone who is short TESLA is a player hater.
Sorry about double posting but this appears elsewhere in a response rather than an original post …
My reading was that the stock has to trade at 130% or more of the conversion price for 20 of 30 days during a quarter. So, the conversion trigger is at about 468 dollars; if the shares trade at or above 468 for 20 out of any 30 days you then get to convert your bonds to shares at just under 360 dollars a share, or 2.7788 shares per 1000 dollar bond.
So 468 is the magic number for bondholders, not 360.
Stories in the press have implied that bondholders can cash in for a ‘big profit’ if TSLA stays over 360.
Some other mumbo-jumbo in there about if this and that, but I’m tired…
Remember the Hitler tweet? 4/20 is also Hitler’s birthday. LOL!
I was bearish as anyone else, but – Softbank CEO with a 300 yr outlook can do anything, if anyone will, it’s him.
Elon’s tweet made shorting Tesla a lot less risky.
When short selling, the upside is limited (share price going to $0) while the downside risk is theoretically unlimited (share price going to the moon).
Elon’s tweet just put a cap of $420 on the share price. By doing so, he just limited and quantified the biggest risk that deters short sellers. That makes shorting Tesla a lot less risky that it was prior to “The Tweet”.
I guess regulators have a level they will go for, after that they give up. Chris Collins is a small fish compared to Musk but he gets to feel the pain while market disruptors keep burning money.
A lot of taxpayer funding being wasted on this twat in California.
Wolf, I know you are not a fan of shorting, but if Musk is on a high-wire act between 100 story buildings, and falls…..isn’t there money to be made by waiting for him to fall past the 50th floor, so long as there is an uptick around that level? You shouldn’t catch a falling knife, but can you safely short one?
Sure, there is lots of money to be made. But in terms of shorting the shares (rather than options), the risk-reward relationship is out of kilt. That’s what I’m saying. You have to take huge risks for those gains, as the prior years have shown.
You’re not in control of this situation; the market is, and the market is pulling for Musk, and Musk is leading this eager market along by its nose. It’s you against all of them. Your loss is theoretically unlimited, and your gains top out at 100%. Not good.
Also, this is the most shorted stock out there. It’s very difficult to make this work, just for that reason.
Instead, short something no one is even paying attention to, then get on your big megaphone and tell the world why you shorted it, and when the fireworks subside, cover your short. Those are the successful shorts, but you must have a big megaphone to make it work.
My advice is to not get greedy with shorts. 90% of short trades don’t work out, primarily because people panic and cover the short at a loss. The threat of infinite losses will shake even the most steady among us.
To make a short work in the long term, you have to be able to suffer some losses during what might be a long weight. You will only be able to do this if you offset the short position with long positions in other stocks, or you limit the short position to an amount that will never cause you worry.
Another option to short the stock then sell a put with a strike price 20% below the current price. If the stock price sits at the same level for a while, you’ll make money. If it continues to go up, you at least mitigate your losses.
I would never enter a short in this “market” that was not hedged in some way. The machines and quants are out there. They have inside information and they use that to manipulate other traders.
Sorry. Meant to say long wait, not weight.
The worthless SEC finally stirs itself to check out this blatant market manipulation by Musk.
I’m not plugging a blog but I frequent Garth Turner’s blog for the simple reason to see what the average person with close to zero investing knowledge does or how they answer certain questions. This give me a good idea on how to make money doing the opposite. Sure enough someone who owns a few houses in Toronto by chance or by dumb luck gave her advice on what to do in the stock market and that was to short Tesla stock when it was about $280 U.S. a share. I’m still kicking myself for not shorting it the day she posted that. For the record I responded to her answer and told her they’d rig that one back up above the 300 mark because it was deemed a FANG stock.
For not shorting it meaning to buy it long.
Speculating is binary. Half the participants get to laugh at the other half.
I’ll always wonder how many people were ruined by the advice given by Garth to sell just about everything they owned, including the home they lived in, and keep putting the proceeds into Nortel stock. At about the same time, at a Christmas gathering where everyone was discussing how high Nortel was going, I proposed it was worth 2 bucks – when it was then, I think, about 60. You can imagine the looks I got, and yes, I was wrong – it went to zero. Next Christmas the conversation was all about how their RRSPs were wiped out.
And yes, I have been spectacularly right and wrong about many things too, the most consistent and frustrating example being to sell too soon.
BTW, I’ve always considered shorting discussions as some sort of a macho alpha demonstration that really doesn’t make economic sense for most normal speculators, i.e. those employing their own money. It requires multiples of margin higher than ordinary speculation plus the pledging of every asset you own (read the fine print) to be put on a one-way bet that can never yield more than 100% return even with the most unlikely and optimistic expectations.
->Don’t Short Tesla or Anything in This Crazy Market
Oh, it can be done. Tesla will go down eventually, because it’s improperly managed and its management is entrenched, like the rest of the market. You just need a long-term strategy that assumes Tesla and the rest are corrupt and mismanaged.
Sure it’s risky. Look at what you’ve got to work with. OTOH, with that much manure, something’s bound to come up.
Check out some of the genius analyst is now coming up with…I really want what they’re smoking….apparently $420 is undervalued.
You can’t make this up: https://www.zerohedge.com/news/2018-08-15/tesla-whistleblower-releases-vin-numbers-model-3s-punctured-battery-modules
Calling the SEC, calling law enforcement …. J/K because the USA is the most law abiding country on earth, right, right? The Chinese, they are nothing ;)