Sure sign Musk is in real trouble
Signs from inside Tesla paint a very worrying picture about how the future of the motoring giant looks, in light of recent events and what it means for Elon Musk.
Tesla board members and top executives have offloaded more than USD $100 million ($168m) in shares in recent weeks.
Federal filings with the US Securities and Exchange Commission (SEC) reveal that four senior figures at Tesla, including chief executive Elon Musk’s brother, Kimbal Musk, have cashed out significant holdings.
The biggest cash out has been by Tesla’s Chair Robyn Denholm who has sold USD $75 million ($118m) worth of stock in two major transactions over the past five weeks.
The Australian executive, a former chief financial officer at Telstra, took over from Musk as Tesla chair in 2018.
Reuters reported in March that Denholm is believed to have sold $US532 million ($836m) in shares since joining the company.
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Elon’s brother Kimbal Musk unloaded 75,000 shares worth USD $27 million ($42.5m) in February.
Tesla’s chief financial officer sold more than $5 million in shares in recent weeks.
Some of these sales were part of scheduled sales plans but the sheer volume of stock being sold by senior Tesla figures has raised red flags among investors.
RMIT Professor Angel Zhong, a finance expert, said such sales are often viewed negatively in the market.
“Board members are considered insiders of a firm. They sell stocks because they may have information that the firm’s share price is currently overvalued or lack confidence in the future performance of the firm.” she said.
Professor Zhong explained that some executives, like Denholm, sold shares through predetermined plans, others board members are offloading at a time when Tesla’s sales are declining.
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“Sales made under predetermined plans (like those by Robyn Denholm) are scheduled in advance and are not necessarily a reflection of current market conditions or insider sentiment.” she said.
“Other board members are selling their Tesla shares at a time when Tesla car sales are declining, which may reflect negative sentiment and outlook for the firm.”
The recent sales come at a terrible time for Tesla, with the stock dropping by nearly 50 per cent from a high in mid-December.
Several factors have contributed to the decline including slowing EV demand, rising competition from China and concerns over Musk’s leadership as he juggles Space X, X, and his government role as head of the Department of Government Efficiency (DODGE).
Yesterday, an early investor Ross Gerber called for Tesla chief executive officer (CEO) Elon Musk to step down, arguing that his time is stretched too thin.
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Zhong said leadership distractions can be a risk for investors, especially when a CEO’s focus is divided.
“News of board members selling shares can cause short-term fluctuations in Tesla’s stock price, as investors might view these sales as a lack of confidence. If perceived as insiders losing faith in the company, it could damage Tesla’s reputation among investors and the public.” she said.
Beyond insider stock sales, broader investment has also turned.
According to Stake market analyst Samy Sriram, Tesla sell orders on the platform have surged by 30 per cent in the past week – the biggest increase of any stock.
“High-volume selling from executives can sometimes be perceived as a signal that insiders know something negative about the company, or simply believe that shares are overvalued.” she said.
Short sellers beating against Tesla have reaped more than USD $16 billion in paper profits from the steep drop in Tesla’s share price over the past three months.
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