I have a little time so I will answer as best I can.....
First, you're correct, the VW situation was unique. IMO, Porsche did
nothing wrong. They wanted to own VW for R&D that they could not afford and
had accumulated a large amount of stock. Hedge funds were short, based on
valuation, and got run over when Porsche revealed their holding.
Your question were:
1. How high will the share price go when the squeeze occurs?
A: it really depends on the pain threshold. Generally a squeeze happens when
panic occurs. In the case of Tesla, the shorts are running out of catalyst's
and most are paying 10-25% to borrow the stock. Despite Ballsack's rant's,
I did meet with the company a couple weeks ago and it became clear to me
that the shorts best hope is a massive delay in production. Keep in mind, we
have 25mm shares short and now the volume has dried up to the point where it
would take aprox 50 days to buy 25mm shares.
In a panic, this stock should easily trade above 50.00. Perhaps much higher.
2. How long will the share price stay within 5% of the new high?
A: Probably not long. A short squeeze is a melt up. Margin call's, forced
buying, no liquidity. As a short, you are truly riding the pain train if you
get squeezed. It's panic buying at any price. The best indicator is volume.
If a squeeze happens, this stock will trade 5mm shares + a day.
3. How high above the all-time high does the share price need to get before
mutual funds and other institutional holders begin selling and convert the
squeeze into a "bigger fool" contest?
A: The all- time high is irrelevant to institutional holders. The shorts are
doing all they can to keep this under 35 at the moment. I am sure there is 7
figures to buy above that level. The momentum funds will rip this stock if
it starts to break-out. The momentum funds will sell it back to the
short's for a trade however big, core holders will sell based on valuation,
not a new high. All of them have a price in mind. If you're a long term
holder, its easy to get to a 70.00 valuation and keep in mind, a holder like
Fidelity is long term. They could care less if this stock trades to 20 again
before it goes to 70. They are too big to trade around their position. They
get a valuation in mind and add to the position if they feel it is oversold.
Not sure if that helps, it's not an exact science.
Thanks for offering your opinions (ditto to the others who also chimed in.)
I guess we'll see this week how high it goes, and how long it lasts this time (I got burned in the Nov/Dec '10 squeeze but got more than whole at lock-up expiration and have stayed well ahead since because of the volatility and decaying extrinsic value of short calls.)
My only experience with the 10-25% fee is Fidelity quoted 10% in the pre-market the morning Jonas published the MS double-downgrade in mid-December. I passed since the short calls don't use up much of one's available margin credit balance.
IMO, the high short interest is well funded institutions, which have analyzed the fundamentals, and will be around until they score a multiple bagger or Musk proves he can sell 20,000 vehicles/year profitably. About one third of IPO shares were sold short in the first semi-monthly reporting period before any retail short could trade the shares in a margin account. I posted this about a year ago:
"NY Times reporter David Johnston in his book "Perfectly Legal" asserts that GS and other investment bankers (IB) help insiders with wealth concentrated in a single security to diversify using the following scheme:
The insider deposits a large block of shares with the IB and agrees the IB keeps all of the first 30% appreciation in share price and a reduced percentage of the price appreciation beyond the first 30%. The IB loans, at a nominal interest rate, the insider 90+% of the value of the shares deposited . The insider uses the loan to buy a diversified basket of [dividend paying] other securities. The IB sells the deposited shares short, relying on its deal for upside appreciation as protection if the share price moves up rather than down.
The first report of short interest on 7/15/10 was 5.6 million. (Retail shorts are impossible in the first 30 days because the shares cannot trade in margin accounts until 30 days after the IPO.) As "noname" can attest, shares for borrowing by retail traders to short have been scarce, yet in nine months the short interest has more than doubled to 11.6 million as of the 3/15/11 report.
Who knows if Johnston's assertions are true, but with TSLA giving 25% of the shares outstanding to insiders in the form of options with a pittance for a stike price and the profit fundamentals so fatally flawed, it might be tempting for the morally challenged."
As a knowledgeable hedge fund manager, do you give any credence to Johnston's assertion?
Have you had a chance to run the low case projections I posed through your FCF spreadsheet?
Wow, the Grey lady (NYT) should fire that guy. Thats ridiculous.
To be fair, they do help insiders move stock. In most instances, they will do an "overnight block trade" however thats an advertised trade and although it looks like a company offering it is all secondary stock and the underlying company receives no proceeds. Its all in the offering document and states very clearly where the stock is coming from. For the most part, its irrelevant as most of those trades are bought by a few institutions and the general public would never,unknowingly, participate.
Part two- Worst case scenario for any company is bankruptcy. You are correct in your assessment of the shorts. A lot of them are smart guy's that did a lot of work. However the bet they made was predicated on Tesla missing milestones. It hasn't happened. Most would most likely not put that short on today. They did it for a scenario that has not played out. The odds that they will stumble seem to be going down daily.
The base case still gets you a 44.00 stock, IMO.
- Global car market runs 3% CAGR. Global EV penetration at 3%. Tesla share runs at 2.5% ( in their market) Model S and X combined volume is aprox 50k units 2020 and Gen 3 does not ratchet up as expected. Break even OP reached early 2014, OP margins peak at 14%, normalize at 9%
The problem the shorts now have is, if its ever going to work, its going to take awhile and the carry gets very expensive. If they are paying 10%-20% and the stock goes to 45-50 before it gets cut in half, they still lose money. Sack will say I told you so and all that took his advice have a tax loss carry forward.
I see he replied to you. I am sure it was helpful, calming and rational.
N0m0re, there is no low case projection that shows Tesla not making it. That's not how K-K-K-K-K-enn's business operates. Everything he does is predicated on a company meeting goals/objectives. Realism has no place in his world. The fact Tesla is losing money and burning through cash is inconsequential.
If you think Kenn has a low case, why do you think he boasted that by 2015 Tesla will be generating $4.6 billion in revenue? Only problem with that number is there's not a single expense factor slotted into the equation. Therefore, FCF is a moot point regardless of the dollar volume. Kenn simply has no handle at all on what Tesla expenses and debt payback will look like.
In sum, what I see is a 4-corners stall tactic. IMO, Musk is hoping for a strike of lightning that will somehow open the sky while depositing drooling customers on Tesla stores who can't live without buying the 4dr.
Thanks, Kenn. I'm paid to do this? That's laughable. You're in this type of business. Would YOU pay me to bumble up a job in hopes that one person "might" side with me? Sure you would! People in your business have no heart. You have zero accountability. Lying IS your business!
Put me on ignore. That was your intention when you came here. But others will also catch your lies as well. And I'll be laughing, especially when you slither away for good.
That coming from someone who is a multi alias, paid troll that publicly outed himself.
You are paid to lie and humiliate yourself while simultaneously making sure the entire world knows how truly ignorant you are. You're a sad excuse of a man. Clearly have no self respect or self worth. Why should you, you're a pathetic liar and behave accordingly. You add Zero value. You are now and forever will be on ignore. Enjoy talking to yourself.
You came here to get the short rationale? Okay, then why is it you haven't asked a single question of anyone who said they are short? Why is it the ONLY thing you've done is insult people, me specifically, when I never once took a shot at you?
Kenn, again, YOU LIE! If you were on this board to find truth, justice, and the American Way, you wouldn't ALSO be telling everyone you were on this board to clean up the lies, distortions, etc?
You say you run a Hedge Fund? Well, on the food chain of business, you at the bottom of the chain! Your life is bets. You might as well be living in Vegas. I can assure you most business people see people in your profession as blood suckers. Plus, the list of reliable, trustworthy hedge fund managers isn't very long. In fact, when lights go on in an office, one can clearly hear rustling of legs (roaches) scattering.
While your profession can pay a great deal of money, the reputation of a hedge fund manager is one step above a maggot. Your personna on this board is so suited to the slime in which you slither.
Thanks. I have said it before and will repeat. The only reason I came out here was to find the short side rational. What I have found was Sack. The shorts should be infuriated that he is their public representation.
I mean, who would want that donkey representing you as you are getting run over?
There are some smart guys out there that are short, perhaps they put the position on for good reason and have stuck with it waiting for the company to miss a milestone and it just has not materialized. The clowns on this board that wash, rinse and repeat the same nonsense on a daily basis dont seem to realize how pathetically desperate they portray their position.
The company is executing, does not have a cash problem, has a state of the art production facility and, in my opinion, will deliver, not only on time, but early.
Elon was acknowledged by Dan Ackerson yesterday as "seemingly doing the right things". I wont go into that conversation in detail however I will say Dan, although CEO of GM, is not a car guy. He comes from private equity and frankly did not have a disparaging comment about TSLA. He spoke from a business point of view, not as competitor taking cheap shots at a start up. He said, and I quote, "we cannot put our heads in the sand and pretend that the entrepreneur's are not doing a better job of battery technology than we are". He did not specifically say that in regards to Tesla however the reference was clear.
Yes Sweet Lips, your are very very very creepy.
Hedge Fund Manager - HA HA HA HA HA HA HA What a laugh HA HA HA HA HA
But maybe so, could be manager of the Green Hedge outside of my office. Must be share with the clippers to be our Green Hedge Manager.
Oh Dear Ken. I'M REALLY SORRY SWEET LIPS.
I knew a number of Hedge Fund Managers and your various responses over the months, are more in the line of young no it all, rather than a Professional Hedge Fund Manager.
Don't talk about ANGER sweet lips, your normal posts are normally crammed full of ANGER at whom ever does not agree with you.
As for my writing style, I think it's a lot like your own sweet lips.
Especially the HA HA HA HA HA - THAT IS YOUR STYLE, ISN'T IT SWEET LIPS.
Cool. Kudos to you for realizing that TSLA is a gold mine for those who are smart enough to trade it properly.
I never really understood how one could be short for such a long time betting against a certain company without actually doing some in depth research. What these guys are doing stubbornly shorting this stock is financial suicide.(this coming from a guy that loves shorting actual shares of pos companies)