1/ We have from time to time posted on Tesla’s shareholder activities because the data can be instructive. If you find yourself perplexed by the behavior of Tesla’s stock, you are not alone. This will be a long thread, so apologies in advance.
2/ A few points to keep in mind. Tesla’s stock turns over at a velocity unheard of in public markets. Every 20 days on average, it trades out its entire market cap. Said another way, it gets a new shareholder base every 20 days. It doesn’t, actually, but you get my point.
3/ AAPL turns over its mkt cap every 177 days. American Tower, a comparable mkt cap to TSLA, trades out every 200 days. Institutions don’t trade. They invest for the long term. If TSLA trades at 10x the rate of AMT, and institutions aren’t the cause of the turnover, who is?
4/ Before we get to the answer (which is obvious), why is this even important? Because it speaks to the transient nature of Tesla’s shareholder base and, among other things, Tesla’s ability to get an equity deal done now.
5/ Leaving aside the direction of the stock price, this kind of share movement, the musical chairs, is typical of lower quality stocks or companies in severe distress. GE, for example, changed over its shareholder base much more rapidly in 2018 than 2017 as its fortunes fell.
6/ Even if Tesla weren’t seemingly blocked by some issue, we have posited this unstable shareholder base would make a large equity offering IN LINE WITH CURRENT MARKET PRICES extremely difficult to pull off. There simply is no anchor buyer to build a book around.
7/ If this name were broadly viewed as attractive by the investment community, it would be consistently accumulated and its share turnover rates would be lower. Way lower. So, no new buyers, and those that have bought prove, every day, they are not in this for the long haul.
8/ Next to what we perceived in 2017 as wildly unrealistic demand expectations and the company’s dodgy financial disclosure, what got us in to this short in size was this shareholder dynamic specifically. Healthy, good companies simply don’t trade like this.
9/ On to the data. . . As of the end of 2Q18, the top 13 shareholders in Tesla controlled 80% of the float. Only six holders owned more than 5%, including Leon. (TSLAQ will be happy to know that Worm Capital owns 120k shares. . .)
10/ Volume in Q1 was 396mm shares, Q2 559mm shares and Q3 so far is 522mm shares. Q1 had the horrendous earnings call last the two days of the qtr. Q2 had the annual meeting and 5k/wk, and Q3 had the 420 fakeover.
11/ Between 3Q17 and 1Q18, institutions increased their holdings by 10mm shares total. From the end of 1Q18 to the end of 2Q18, institutions reversed course and were net sellers of 750k shares. In all of the quarterly volume outlined above, institutions were just a tiny part.
12/ It is possible the Saudi’s made some of their alleged purchases in Q1 and some in Q2. We also know from 13F’s that T Rowe increased its purchases by 5mm shares in Q1, so half the total net increase from 3Q17 to 1Q18 was just T Rowe.
13/ During 2Q18, Tesla’s share price increased by 35% from the $252 yearly low reached on 4/2/18. Total volume in Tesla shares was 559mm during that time, a material uptick from Q1, and averaged 8.7mm shares per day. During 2Q18, T Rowe unloaded the 5mm shares it bought in Q1.
14/ So T Rowe unloads a grand total of 0.8% of the total volume traded in the quarter, other institutions bought 5.7mm shares, or 1.02% of total shares traded. The rest, or 99%, was retail and dealer to dealer activities.
15/ Based on the price action in the shares, one can only assume the Saudi’s were purchasers in early April. Between 4/2/18 (after the disastrous Q1 earnings call) and 4/6/18, TSLA shares increased in price by almost $50/share, and volume for that week totaled 87mm shares.
16/ If the Saudi’s were a 4.999% purchaser, they would have needed to buy approximately 7.0mm shares. If one assumes the Saudi’s bought all of their shares only in the first week of April, they would have been just 8% of the volume for the week
17/ So in a week where the Saudi’s might have been 8% of the shares traded, the stock moved up by $50 or more than 18%. No other institutions were buyers of size in 2Q18.
18/ Once Q2 ended and Tezzla announced it had – surprise, surprise – met the magic 5k/wk M3 production target that only they and Moody’s care about, someone started unloading. The stock plunged from $348 on 6/30 to $308 by 7/6. Volumes totaled 63mm shares for that week.
19/ Fidelity’s public records show it selling 1.3 million TSLA shares across its platform in July, and one could assume that it was the seller in the first week of July. If Fidelity did sell 1.3mm shares, out of 63mm total, and knocked the stock down $40, this is one thin stock.
20/ For the remainder of the month, the stock traded in a range around 300/shr. July totaled 172mm TSLA shares traded, and average daily volume for the month was 8mm shares, which obviously includes the volume spike that occurred in the first week.
21/ Then came the 420 tweet. Volumes for August spiked to 277mm shares, with daily averages in the 10mm range, but tailing off pretty substantially by month’s end. And in all that noise, with all that volume, Tesla’s stock moved only 1.1% in the month.
22/ So through 9/14, Tezzla has traded 522mm shares vs. 559mm for Q2. With two weeks to go, and the 420 fakeover included, volumes for Q3 are on a par with Q2. Message? There is always something with this stock. The extraordinary becomes the ordinary. And none of it matters.
23/ The 13F’s won’t be out for another 30 days. They will be an interesting read. A purchase by the Saudi’s of 8% of the weekly volume possibly moved the stock 18%. A possible Fidelity sale that amounted to 2% of the weekly volume moved the stock 10%.
24/ We have had private conversations with a smart investor whose opinion we respect greatly. He is dumbfounded by the price action in these shares. We understand. Until you lay the numbers out, it is hard to believe that retail can have such an impact. It can in a thin stock
In the last week, from another test of the lows, the stock has rebounded, but on very light volume. I doubt it was an institution buying as this stock is now toxic. Call it an educated guess.
h/t to @markbspiegel for correctly pointing out that 13F's aren't due for 60 days at the latest not 30. I always assume, incorrectly, other fund complexes are as anal-retentive as we . . .
