Sorry, couldn't bare listening to this guy talk for more than a minute, so please forgive my question if it was answered in there. S&P fund must buy the % that Tsla represents, but do they have the flexibility of when to buy, as long as they have the shares by Dec. 21st?
Summary: sp (funds) don’t take the risk, they sell the trade to investment banks/institutional trading desks that manage the flow- often the large Axe of the trade gives them a substantial advantage to make serious money as they use the massive imbalance to keep the closing print high (which they pre negotiated to sell to the sp funds) (He’s does ramble a lot and could state the same message in half the time agreed, but it is accurate and informative.) Here’s my question for others: He discusses a hypothetical scenario where towards the date of inclusion where either Tesla or Musk decides to do a secondary offering which could crush the price gaping down to sub 400, BUT in that event wouldn’t Telsa/Musk then just not float as much, not complete the offering- it’s not as if they don’t care about the price... they would be choosing to do the offering late because they saw the price move to ‘overvalued territory’ in their minds but wanting to do an offering perhaps at 550 when the mkt price is 600 and then having the price crash to sub 400 doesn’t seem realistic unless of course they were selling significantly lower which I doubt they would (especially considering they didn’t just weeks ago when approached at mkt=400/450). Anyone have any color on this ‘risk’ ?
sorry just to clarify , yes the bank/trading firm can trader whatever/whenever they want, and will obviously buy ahead, the sale to the funds is done on that last print for inclusion.
I think your summary is missing the most important point from the video. The video discusses the risk inherent in the trade prior to inclusion. It also explains how investment banks use upgrades/downgrades to manipulate stocks. One thing to take into consideration is that Musk has had a rough relationship with analysts (investment banks). Now he has them by the balls. He loves crushing naysayers like Ackman. He has nothing to loose if stock drops - he will just buy more and say/promise something positive. Not everything is about money, there’s a human element like egos and prior relationships. That is what makes trading on larger scale a completely different game.
If Musk could sell a large portion of his shares, and the scenario laid out in the video is true, it would destroy the remaining stock that Musk still has in the company. It would be a massive payday for him, but would lower the value of the rest of his holdings. In other words, if he or the company knows that providing the shares to the S&P funds would lower the value of his company, why would he do that? Seems like it would make more sense to cash out slowly.