Featured Image Credit: Wikimedia Commons [CC BY-SA 4.0]
Tesla (TSLA) shareholders are facing raised margin requirements as brokerage firms try to free up shares for institutional investors. TSLA’s share price closed at 1,516.89 on Tuesday, up 1.32% from the previous day. The EV automaker’s rising share price indicates there is massive interest from institutional investors. However, it seems there aren’t enough shares to go around.
In the midst of TSLA’s meteoric rise, Bezinga founder and CEO Jason Raznick noticed that brokerages were raising their margin requirements—explained in the video below—which forced some bulls to sell their shares. Raznick explained that brokerages were trying to free shares so institutional investors could buy them.
Raznick shared that E*TRADE Financial Corporation notified him that his margin requirements for Tesla shares would increase from 55% to 70%. He explained that E*TRADE Financial Corporation gave him the option to sell some of his stocks so he could meet his margin requirements or the company would do it automatically once the deadline passed.
In a recent video by Rob Maurer, from Tesla Daily, estimated Tesla's float share count to be around 147,620,000. Float shares are those that can be publicly traded. They are separate from illiquid—or non-float— shares which are usually held for much longer periods of time. For example, Elon Musk’s Tesla shares are illiquid.
So Tesla has about 147 million shares available for public trading, according to Maurer’s rough calculations. Based on Raznick’s assumptions, institutional investors want to invest more in TSLA and to do that they would need to buy more shares. However, there are only a finite amount of shares to go around so brokerages have raised margin requirements to “encourage” long TSLA bulls to sell their stocks.
Raznick received the message from E*TRADE Financial Corp. last week when TSLA stock was hovering between US$1,300 and US$1,400. If Tesla does make it into the S&P 500, the demand for TSLA shares could go up even higher.
"There are people selling this stock right now not because they want to, not because they have bad fundamentals; they are being forced to. Including myself and including some others, we are forced to sell stock because of the margin we have on it, and I do believe that represents a potential long-term trading opportunity," Raznick said.
Legal Disclaimer --
This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Ma. Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
Ma. Claribelle Deveza holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.