Robyn Denholm, chair of the board at Tesla, recently sold hundreds of thousands of shares. She sold or transferred out over 52% of her portfolio. This sale is in accordance with a predetermined selling plan submitted to regulators. That’s notable given that Tesla’s stock is in the midst of extreme volatility and Tesla’s profits are cratering.
Denholm filed her 10b5-1 selling plan on July 25th, the same day that Elon Musk publicly endorsed Donald Trump for president. This timing of this sale is particularly unfortunate given the likely insider sentiment it indicates – especially as Tesla has successively lowered guidance on their financial prospects. In the first four months of this year, Denholm’s stock sales helped her cash windfall skyrocket. According to news accounts, this was the cause of over 60 percent of her total profits from these trades. In the meantime, Tesla’s market capitalization fell by a third. This drop underscores the sudden, precarious market conditions now arrayed against the electric vehicle maker.
Denholm gained possession of just under one million shares via options, buying them for $25 a piece. This amount is considerably less than the market earning price during the past nine months. If true, it means her earnings from the recent sales may reach into the millions. That’s how she was able to purchase it so cheaply. Now, the market value is higher than ever, and she is taking full advantage of this sweet spot.
It’s worth emphasizing that Denholm isn’t the only one selling stocks. Tesla insiders, including Tesla’s chief financial officer and a slew of directors, have all engaged in actively selling. That engagement took place during the same nine-month stretch. These five people have together sold nearly $189 million in stock. This historical offloading has created a rare urgency among investors to dig into the driving factors behind these actions.
Insider selling hit record highs recently, raising fears about the company’s long-term health. The maker of smart glasses now finds itself under pressure with eroding margins and a volatile stock. Once inside, executives often make moves that project their perpetual confidence to investors. When they’re able to accomplish big sales, it often leaves them or their supporters worried about the long-term business climate.
