Shares of Tesla (NASDAQ:TSLA) stock are in full focus following a $19 million sale by Director Kimbal Musk, the brother of CEO Elon Musk. On April 3, Kimbal exercised options to purchase 100,000 shares priced at $24.73 a piece, amounting to a value of about $2.47 million. On the same day, he sold all of the 100,000 shares at prices between $192.78 and $202.64 for a total of $19.57 million, netting him a $17.1 million gain. Usually, Tesla insiders would not be able to sell until the electric vehicle (EV) company reports earnings on April 19. However, Kimbal sold the shares via a prearranged 10b5-1 plan enacted on Dec. 8, 2022, which provides immunity from the blackout period.
The sale has generated controversy, as Kimbal’s sales in the past have marked relative tops for TSLA stock. Let’s get into the details.
Kimbal Musk Sells $19 Million of TSLA Stock
Kimbal’s last sale, which occurred on Nov. 5, 2021, was similar to today’s sale. On that day, he exercised options to receive 25,000 shares of TSLA. On the same day, he gifted 25,000 shares to an unknown recipient and sold 88,500 shares with a combined value of $108.77 million. Unlike the recent sale, the 2021 sale was not enacted via a 10b5-1 plan. Today, shares of TSLA are still down by over 50% compared to the stock’s average price on Nov. 5.
Meanwhile, hundreds of thousands of shares have been sold by insiders in the past five years. According to SECForm4.com, insiders have purchased $81.08 million of TSLA in the past three years while selling $40.80 billion in shares. Much of these sales can be attributed to Elon, who sold off billions of dollars of shares to fund his $54.2 billion acquisition of Twitter. In the past five years, Elon has purchased $79.77 million of TSLA and sold off $39.36 billion of shares.
So, should you follow in Kimbal’s footsteps? Not according to Barron’s, who notes that his previous 10b5-1 sales “haven’t presaged any terrible news for Tesla stock, based on recent history.” On top of that, insider sales do not convey as clear a message as insider buys.
In the words of famed investor Peter Lynch: “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.