Insider trades provide investors with added context through which they can extrapolate conclusions about a stock’s near or medium-term outlook.
To use a simple hypothetical example, rarely would any trader enter a long position on a stock that’s significantly up if the members of the board are dumping inordinate numbers of shares.
On September 23, data retrieved by Finbold’s SEC-verified insider stock trades signals revealed Tesla (NASDAQ: TSLA) chief financial officer (CFO) Vaibhav Taneja sold $2 million in Tesla stock. The transaction encompassed 8,000 shares, and the trade was executed at a price of $250.
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Why Tesla CFO’s stock selloff isn’t a bearish signal
Earlier, we noted that insider trades provide added context — however, it is equally important to take into consideration the context surrounding the insider trade itself.
Tesla’s CFO selling over $2 million in shares is not a bearish signal in the least — and here’s why.
Taneja’s sale was conducted under a 10b5-1 trading plan. For readers unfamiliar with the term, a 10b5-1 trading plan is predetermined and planned well in advance, often months ahead of a sale, allowing insiders to avoid accusations of insider trading.
In this particular case, the plan dates to May 1. Still, the CFO made a tidy profit — when the plan was put together, TSLA was trading at $179.99. At press time, the stock is trading at $256.11 — in other words, it has risen by 42.29% since May 1.
To add further credence to this point, Taneja’s total amount of stock held has not actually changed — the CFO also exercised options contracts to acquire exactly 8,000 shares at a price of $18.22 apiece, for a total cost of $145,760.
Tesla is on a bull run — impressive earnings are anticipated
At press time, TSLA, although down 2.54% on the daily chart, is up 24.49% over the past 30 days, 46.26% over the past 6 months, and has finally entered the green on the year-to-date (YTD) chart, being up 3.16% in that timeframe.
The headwinds driving the stock’s price upward are owed to the expectation that the company’s next earnings report, due October 16, will showcase impressive results.
Moreover, TSLA’s upcoming Robotaxi event on October 10, which will showcase full self-driving tech, could serve as a catalyst or even a watershed moment if things go well.
Many equity analysts, like Alexander Potter of Piper Sandler, have raised price targets above $300 due to impressive projections regarding vehicle deliveries — while researchers who utilize technical analysis have noted that recent price action is also supportive of an upcoming price surge.
Traders and investors keeping an eye on TSLA should take away a simple conclusion — context is king, always — and going a step further in analysis is a prerequisite, not an optional bonus, when it comes to properly deciphering the goings-on of the market.
