Tesla Pays Billions to Try to Make Elon Musk Do His Job, But Is It a Trap?

Dear reader, if you would don your tinfoil hat along with me, here is where this article ventures into speculative territory, and we wade into the second half of the title in murkier waters.

Trying to ditch Musk as CEO and then paying him billions to stick around as CEO really only makes sense in one context, and it is a context that has quite a bit of circumstantial evidence supporting it. Longtime Tesla investor Ross Gerber said to Yahoo Finance in August of last year before anyone knew what a MechaHitler was, that “Over time, I’ve just been sort of lowering my position, because I just don’t have the same confidence that they’re going to achieve the goals that were set out for Tesla several years ago and even recently, which is really to sell more cars.” Another major Tesla bull, ARK Invest’s Cathie Wood, sold 27,377 shares in May.

Gerber blamed Musk, saying “It’s really a quagmire where you have the best products in an industry but a CEO who doesn’t actually work there, who doesn’t try to sell the cars.” Again, this was last year. Before Tesla announced its most catastrophic quarterly earnings in history, proving that it is basically a carbon credits company that sells a couple of cars. The Cybertruck has been a world-historic disaster, a literal anchor of impossible to sell inventory weighing down a company that, without its carbon credits revenue in the first quarter, would have lost money. Tesla has big, big problems, demonstrated by its second consecutive negative quarter in the spring alongside Musk pivoting to claiming it is a robotics and AI company now (my money is on it eventually becoming a Bitcoin treasury like another meme stock that doesn’t make much money, Microstrategy). Even before Elon started wielding chainsaws around on stage next to the Argentinian president while looking like the least sober man alive, some major Tesla investors lost confidence in him. If big investors were dumping stock before the end of the first quarter, what do you think happened when they saw those catastrophic first quarter earnings?

Billion-dollar fund managers like Gerber and Wood are not the only ones who have sold huge amounts of shares recently, and this is where my “trap” conspiracy theory finds plenty of meat on this bone. In April, Tesla saw its first insider purchase of shares since 2020 when Tesla director and co-founder of Airbnb Joe Gebbia purchased 4,000 Tesla shares for about $1 million (that 2020 insider purchase was Elon and director Larry Ellison investing $10 million and a little less than $1 million in Tesla stock, respectively). Save for this one buy, every other insider transaction since Elon and Ellison’s investments has been a sale. Ira Ehrenpreis, chair of Tesla’s compensation committee and one of Tesla’s longest serving directors, converted call options and then sold the stock from it, making Ehrenpreis $162 million in May. This is different from Musk’s option strategy, as Elon has typically paid to exercise options then held on to the shares to increase his position in Tesla.

Rupert Murdoch’s estranged son and member of the Tesla board, James Murdoch, exercised 54,776 stock options in March on the worst single-day loss for Tesla since September 2020, turning around and immediately selling them for $13.2 million. Another board director and Elon Musk’s brother, Kimbal Musk, exercised an option to gain 91,600 shares and sold them for $31 million that same day. In February he sold more shares at the earliest possible moment, pocketing $27 million. Tesla’s Chief Financial Officer Vaibhav Taneja also converted some shares to cash in February, selling $8 million over a period of 90 days. Tesla board chair Robyn Denholm liquidated $117 million in stock over a three-month period from December to March. Chat, is it good when insiders start dumping stock all at once ahead of the worst quarterly earnings in company history?

Most insider sales like Denholm’s and Taneja’s are conducted under a 10b5-1 trading plan, where a predetermined number of shares are set to trade at a predetermined time in the future, a way for executives to avoid accusations of insider trading. However, the sales by Murdoch and Musk’s little brother earlier this year were not part of these 10b5-1 plans. It was a curious choice to sell the shares when they did, as Tesla stock declined for three weeks before the Tesla board members chose to sell. But sell them they did.

So if company insiders in major positions of power are dumping hundreds of millions in stock, while also offering the embattled CEO billions in options, does that seem like a bunch of insiders who want control of a company? Maybe they’re happy to give Musk more control over a stock that their sales suggest they think is over-valued. Or perhaps they have accepted that the only way for Tesla to stay alive amidst declining sales and China’s BYD coming to eat its lunch is to go all-in on the cult of Elon so his rubes will keep the stock price hilariously over-valued. But given the huge insider sales alongside Wall Street souring on the stock and longtime investors like Ross Gerber and Cathie Wood downsizing their positions, it’s not difficult to make the allegation that this is a rats fleeing a sinking ship situation, all while the rats like Murdoch and Kimbal Musk try to stick anyone but themselves with the bill. Generally, the strategy in these situations is to find the biggest fool and leave them holding the bag, and to my conspiratorial eye, that’s what it looks like the Tesla board members are doing.