Jump to content
 
Sign in to follow this  
Jedi2155

Financial Markets

Recommended Posts

Google is going to have a stock split. It will be a bit different because they are creating a different class of stock. Each share owned currently will be split into 1 voting and 1 non-voting share. They will also trade on separate ticker symbols. The interesting part will be how much of a price premium voting shares will have.

 

http://www.mercurynews.com/california/ci_25028840/google-poised-execute-long-delayed-stock-split

Share this post


Link to post
Share on other sites

Previously there was a lawsuit regarding the issue of a second class of stock. Google settled it 3 months ago. They will pay fees if the class C shares are more than 1% lower than the standard Class A shares.

 

Google will have to pay the Class C shareholders if the average price of their stock is at least 1 percent below the Class A shares during the first year after the split. The size of the payments will escalate as the gap widens, with the maximum payout required if the gap between the average prices of the Class C and Class A shares is 5 percent or more.

 

In the most expensive scenario for Google, Class C stockholders will get 5 percent of the average trading price of the Class A shares. So if the Class A stock has an average trading price of $600 during the first year after the split while the Class C stock averages $565, Google would have to pay $30 per share in cash or additional stock.

 

In court documents, Google argued that it's unlikely there will be a big difference between the prices of the Class A and Class C shares, despite their contrasting voting powers.

 

Having different classes of shares is extremely common amongst companies that were once private and then decide to go public. Sergey Brin and Larry Page own 50%+ of google's voting shares, allowing them to have more control over the company.

 

Often founders of the company will issue shares of stock that carry more votes per share, allowing the issuance of substantially more common class stock while maintaining voting control of the company.

 

You can also look up preferred stock, which is stock that receives it's dividends before any other dividends are payed, as well as preferential access to company assets if bankruptcy/liquidation occurs.

 

Different classes of equity and debt exist so that different investors can take on varying levels of risk.

 

TL;DR Yes it's legal. Also quite common.

Share this post


Link to post
Share on other sites

i know about preferred and common stock, i was questioning the legality of the "non-voting" stock, which I have never heard of before.

Share this post


Link to post
Share on other sites

In response to Richard's post about Natural Gas. Here's a decent graph of natural gas futures contracts. If you notice the volatility recently has been rather huge compared to the months before it. Inventories are low, demand is rather high and the prices have been up recently.

 

history.gif?s=NYMEX_NG.H14.E&t=f&w=15&a=

 

http://quotes.ino.com/charting/index.html?s=NYMEX_NG.H14.E&t=&a=&w=&v=d3

Share this post


Link to post
Share on other sites

In response to Richard's post about Natural Gas. Here's a decent graph of natural gas futures contracts. If you notice the volatility recently has been rather huge compared to the months before it. Inventories are low, demand is rather high and the prices have been up recently.

 

http://quotes.ino.com/charting/index.html?s=NYMEX_NG.H14.E&t=&a=&w=&v=d3

 

As soon as this polar storm is over, supply will outstrip demand, and prices will drop. This is a freak storm IMO. FYI, most of California power comes from our huge fleet of natural gas plants.

 

This is why I am against CNG's vs. electrics. Its more efficient to burn them at the big plants (up to 60% thermal efficiency) than burning them at a 20% efficient engine.

Share this post


Link to post
Share on other sites

Yea, I should probably give a brief explanation on what happened. Mt. Gox is one of the major bitcoin exchanges, and they happen to be rather poorly programmed. People have been trying to make substantial withdrawals from Mt. Gox recently because of downtime and other issues. Mt. Gox decides it's time to post about small well known issues in the bitcoin protocol to try and cover up their poorly managed website and to use as an excuse to stop the run on their exchange. This of course not only backfires terribly, but it also sent the bitcoin market in general into a very harsh downward adjustment.

 

Mt. Gox is now in it's death throes. Anyone who's even remotely serious about trading bitcoin is moving to another exchange and not looking back. This means the currency is showing even more volatility than normal.

Share this post


Link to post
Share on other sites

https://robinhood.io/

 

I stumbled across this about a month ago, it's a zero commission broker. It also happens to be funded by google ventures. They're looking to open up trading to a few people soon, I think only a small number of beta testers currently have access. I admit I'm still always a bit concerned with something as important as financial transactions going over wireless and being accessed by your phone, but their mobile app looks pretty nicely put together and supposedly encrypts everything.

 

I don't generally like the idea of product referrals but here's a link if you're interested: https://www.robinhood.com/?ref=49Hgsm

Share this post


Link to post
Share on other sites

I wanted to post a little bit about Tesla. Currently the stock has been moving rather swiftly upwards, and some people are questioning if it's being overvalued substantially.

Morgan Stanley decided not only to raise it's price target from $153 to $320, but also to underwrite some of Tesla's new convertible notes, which will be used for their new giga-factory plans:
http://www.teslamotors.com/blog/gigafactory

Here's some notes on Morgan Stanley and some of their models used for pricing out Tesla:
http://www.valuewalk.com/2014/02/tesla-motors-inc-tsla-morgan-stanley-report/

The analysts do agree that the valuation of Tesla Motors Inc (NASDAQ:TSLA) really is crazy right now. They say it just doesn’t make sense until “at least 2015,” so at least they aren’t denying the fundamentals. The automaker trades at more than five times 2015 estimated EV / sales and 43 times estimated 2015 P/E. And then when looking at valuation using near term earnings, Tesla looks even more expensive, which is why bears are basically freaking out and even some bulls are now starting to question their own sanity.


Here's a much more sardonic look at whether Morgan Stanley is hyping up a stock that they have an active interest in:
http://www.zerohedge.com/news/2014-02-26/morgan-stanley-underwrites-tsla-convertible-offering-day-after-100-stock-price-upgra

This is exactly the modus operandi of the dot-com analysts: roping retail investors in at higher and higher levels while the companies concerned massively diluted shareholders leading to an implosion... I cant remember a time apart from Dotcom where price targets were jacked up in this way right before a capital raising.


I'll go ahead and point out a few basic notes about Tesla. On 1/30/14 their share price was $182.84 which has since risen to $252.54. That's a rather large gain of 32.3% in just under a month. From what I can understand there are two major factors involved in this.

1. The entire market is bullshit bullish. In general the trend for equities has been up, and the market loves trends.

2. Tesla is a growth stock. The easiest way for me to explain this is that Tesla does not follow the same rules as established companies, it's similar to a startup. Tesla is the honey badger of stocks, it does whatever it wants and the market continues to throw money at it, because Tesla has the opportunity to grow - Massive opportunity.

I want to briefly mention that while we're beginning to see rather silly things in the market such as: Facebook's purchase of WhatsApp for $19 Billion, and other tech stocks seeming to head towards the moon. The market is not entirely without sense. Twitter was hit hard after it's first quarter earnings and hasn't climbed back up.

9JY0Awj.png

Share this post


Link to post
Share on other sites

A P/E ratio of 43 is pretty good. Compare that to massive farce to Facebook which currently stands at 118. Most blue-chips are ~10. The market just sees Tesla as a tech company like Apple/Google/Netflix etc. trying to ride the train till it falls off the cliff.

 

That's what all the short sellers were thinking except this gravy train is traveling through the plains of America at the moment. I'm waiting for the Appalachians sometime in 2016-17.

Share this post


Link to post
Share on other sites

Tesla is not really in the business of selling cars, not like the traditional OEMs anyways. If people are expecting Tesla to be the next GM/Toyota then I think they're just wasting their time and grossly inflating the price of their stock.

Share this post


Link to post
Share on other sites

Would you care to elaborate on that Ren? Do you mean that Tesla as a company is aiming to be something larger than just a car company?

 

When I look at Tesla and their recent announcements regarding battery production, I certainly understand where some people might see a closer resemblance to Apple or Google rather than Ford or GM. However, their current revenues and the revenues they receive for the next 3-5 years will be based almost entirely off of their car sales. I did some quick research regarding their component sales to other companies and found this:

Slicing automotive sales further, Tesla reported $1.351 billion in vehicle sales, and $35 million in powertrain component sales. That pencils out to $46 million of Tesla's revenue coming from components. Tesla Motors also earns revenue from selling ZEV Credits to other automakers, which totaled $129.8 million over the first nine months of 2013. This makes a total of $175.8 million in revenue from sources other than Model S sales, or about 12% of Tesla's revenue. Three percent is represented by sales to other carmakers.

http://www.plugincars.com/will-teslas-component-sales-toyota-daimler-and-solar-city-mean-higher-chance-success-129088.html

 

So while you might see their potential for growth outside of the auto market, how long term are you looking?

Share this post


Link to post
Share on other sites

Tesla is a small company relative to the market. They sell very expensive cars. You cannot really compare them to an OEM like Toyota. They cannot sell cars like an OEM does and OEMs cannot build cars like Tesla does. Think if GM was to offer 3 models of cars, 2 of which are in the 6-figure range?

 

There are no Tesla dealerships. They have showrooms that provide no vehicle servicing or technical capabilities on site as well as Tesla "service centers" in NA that are owned and operated completely by Tesla itself (where you can get servicing for cars). There are about 50 of these in NA.

 

Tesla has very little carbon footprint (relative to their production) and in fact nets, as you said, a good chunk of revenue from ZEV credits (which GM is the biggest buyer of, ironically). They also benefit a good deal from govnt. subsidies toward EV's both as a company and from their consumer side in the form of rebates.

 

I'm not saying they're not successful, but I honestly don't see Tesla doing anything to the automotive industry in the long run. If Tesla wants to expand, it either has to play by the same rules as the other OEMs or the OEMs will start getting the same breaks as Tesla is getting. The only alternative is if Tesla stays as a small, niche company.

Share this post


Link to post
Share on other sites

The only alternative is if Tesla stays as a small, niche company.

 

Purely based on my own limited impressions, this is what I expect them to do.

Share this post


Link to post
Share on other sites

I agree with most of your points. Personally I consider Tesla to be more comparable to Jaguar rather than the big OEMs. I also agree that the dealership issue will eventually need to be addressed. As it stands, I personally do not like dealerships and hope that the courts rule in favor of Tesla and open up the market to other OEMs.

 

That being said, I do think Tesla has the potential to be successful in the long term, they've shown that there is plenty of interest in their vehicles, and that people are willing to pay the premium for them. Their vertical integration as well as their diversification will also help keep their company competitive. I believe that their government subsidies will ebb away in time. Also the sales of the ZEV credits are helpful to the industry as a whole, and this will likewise become a smaller segment of Tesla's Revenue.

 

I think that the average investor is not looking for Tesla to become the next GM or Ford, rather they're looking at Tesla precisely because different from the large OEMs. Larger more established companies do not experience the same growth as smaller companies. Any investor in Tesla is looking to capitalize on that growth.

Share this post


Link to post
Share on other sites

 

The only alternative is if Tesla stays as a small, niche company.

 

Purely based on my own limited impressions, this is what I expect them to do.

 

I do not expect this to be the case in a 5 to 10 year time scale. They as a company, are very much aiming for the mainstream market in their long term goals. You can see this too in their attempts to deal public perception of the company.

 

They are also working on a variety of products outside the automotive industry.

Share this post


Link to post
Share on other sites

If you ever wanted a concise argument about why High Frequency Trading is bullshit here you go:

VRTU%20Trading%20Days%20.jpg

http://www.zerohedge.com/news/2014-03-10/holy-grail-trading-has-been-found-hft-firm-reveals-1-losing-trading-day-1238-days-tr

 

The firm Virtu had 1 day in the past 4 years where they lost money.

This company is about to have its IPO. The founder also recently purchased the Jacksonville Jaguars NFL team.

http://www.forbes.com/sites/stevenbertoni/2014/03/10/wall-street-gets-new-billionaire-as-virtu-prepares-for-ipo/

Share this post


Link to post
Share on other sites

The biography is interesting:

 

[Vicent] Viola graduated from West Point and served in the Army’s 101 Airborne Division before going on to trade at the NYMEX in 1982. He would later become chairman. Viola started market maker Madison Tyler in 2002. He cofounded Virtu in 2008–and merged the firms together in 2011.

http://www.netsdaily.com/2009/6/26/1346761/who-is-vincent-viola

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

×
×
  • Create New...