Cathie Wood & Elon Musk's $7T Tesla Bet: Why Insiders Are Dumping Stock

The electric vehicle (EV) market has been abuzz with optimism, with Tesla (TSLA) at the forefront. Cathie Wood, CEO of ARK Invest, and Elon Musk, Tesla's CEO, have both expressed bullish sentiments about the company's future, with Wood predicting a market cap of $7 trillion by 2029. However, recent insider selling activity has raised eyebrows, prompting the question: why are insiders dumping the stock while these prominent figures remain bullish?

Insiders' 10b5-1 plans suggest a desire to diversify holdings or secure funds for other purposes. Tesla's board chair, Robyn Denholm, and directors Kimbal Musk and Kathleen Wilson-Thompson have set up plans to sell predetermined amounts of stock, worth $170M, $38M, and $75M respectively, over the next few months. This timing, amidst Tesla's sluggish growth and high valuation, is curious.


Two key factors could be influencing insiders' decisions: regulatory hurdles and political risks. The National Highway Transportation Safety Administration (NHTSA) currently restricts the deployment of autonomous vehicles without traditional controls like steering wheels to just 2,500 per year. Tesla would need to convince the NHTSA that its AV technology is safe and get the regulatory regime for such vehicles loosened to realize Musk's vision of a national network of robotaxis.

Political risks are another concern. Musk has publicly supported former President Donald Trump, and worries about potential political risks to Tesla if Vice President Kamala Harris wins the upcoming election could be a factor in insiders' selling decisions. Given Tesla's high valuation, its price-to-earnings ratio above 100, and the risk of a Harris victory, insiders might be taking profits now, especially for longtime investors.


Tesla's stock valuation, at over 100 P/E, is a concern, given its sluggish recent growth. Despite Elon Musk's optimism about autonomy and Robotaxis, the stock's surge is driven by hope, not proven performance. Insiders selling, despite still holding majority shares, signals caution. They may be taking profits amidst market uncertainty and political risks, as a Harris victory could pose challenges for Tesla.

In conclusion, while Cathie Wood and Elon Musk remain bullish on Tesla's future, insiders' selling activity suggests caution. The combination of regulatory hurdles, political risks, and a high valuation may be influencing insiders' decisions to secure profits now. As an investor, it's crucial to remain vigilant and consider all factors before making investment decisions.