Elon Musk’s brother Kimbal made more than $8 million selling Tesla shares 2 days before he bought them


Elon Musk’s younger brother, Kimbal, appears to have made more than $8 million on Tesla’s stock this week, as he exercised options to buy the stock, two days after he sold those shares at 6.5 times the price he paid for them.

Good timing for board member Kimbal, as the sale of share was made Tuesday, with some of the sales executed above Monday’s record closing price of $498.32.

The stock
TSLA,
+2.78%

bounced sharply to close Friday up 2.8% at $418.32, reversing an earlier intraday loss of as much as 8.6%. The stock snapped a three-day losing streak, but has still tumbled 16.1% since Monday’s record close.

Weekend reads:Early warning sign for Tesla’s stock

This week’s selloff comes after a 5-for-1 stock split went into effect on Monday, and as Tesla disclosed a $5 billion stock offering and a large shareholder reduced its stake.

Don’t miss:Tesla’s stock sinks again to kick off a correction after disclosure of another large seller

On Sept. 1, Kimbal Musk sold 36,375 Tesla shares at a weighted average price of about $482.59, according to a MarketWatch calculation of data from a Form 4 filing with the Securities and Exchange Commission filed late Thursday. The filing showed multiple trades made at prices ranging from about $471.33 to about $502.01.

After closing at $498.32 on Monday, the stock reached an all-time intraday high of $502.49 in the first minute of trading on Tuesday, fell to an intraday low of $470.51 around 10 a.m. Eastern, then bounced to reach $502.28 around 10:30 a.m. before closing down 4.7% at $475.05.


FactSet, MarketWatch

Then on Sept. 3, the filing showed that Kimbal Musk acquired 20,375 Tesla shares at a price of $74.17, as part of a trading plan adopted on Feb. 20, 2020.

For the 20,375 shares he sold on Sept. 1 and bought two days later, he made $8.32 million on the trades. If he were to buy back the extra 16,000 shares he sold at current prices, he could make about $1.49 million on the trades.

Meanwhile, the volume-weighed average price (VWAP) of Tesla’s stock on Sept. 3 was $412.46, according to FactSet. If Kimbal Musk had sold shares on the same day that he acquired them, as fellow board member Kathleen Wilson-Thompson did on Monday, and President of Automotive Jerome Guillen did on Tuesday, he would have made about $6.89 million on the trades, or about $1.43 million less than he did.


FactSet, MarketWatch

Kimbal Musk, who is co-founder of The Kitchen, has been on Tesla’s board of directors since April 2004. He is a member of the board’s compensation, corporate governance and disclosure controls committees. His compensation in 2019 as a Tesla board member was $20,000, in the form of a cash fee.

After this week’s trades, Kimbal Musk still owns 638,240 Tesla shares, the filings show, which at Friday’s closing price were worth about $267.99 million.

Despite the pullback, the stock has still soared 400.0% so far this year, compared with the S&P 500 index’s
SPX,
-0.81%

gain of 6.1%.

Another insider made more than $6 million from Tesla stock trades

Tesla also disclosed late Thursday trades made by insider Jerome Guillen, which made him about $6.4 million.

A Form 4 filing showed that Guillen acquired 15,000 shares at $51.64 on Sept. 1, as part of a trading plan adopted on Feb. 20. On the same day, he sold 15,000 shares at a weighted average price of about $479.00. The sale was made in a series of trades at prices ranging from $471.33 to $502.01. That’s the same range of prices that Kimbal Musk’s sales were executed.

Guillen joined Tesla in November 2010 and has been president of automotive since September 2018.



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Only 19% of Tesla analysts say buy the stock while investors remain ‘insatiable’


There is an old Wall Street saying that investing isn’t about being right or wrong, it’s about making money. No one understands that better than an investor in Tesla Inc.’s stock.

The financial fundamentals and the historical valuations of earnings suggest the market is wrong about the electric vehicle (EV) maker’s stock price, according to the overwhelming majority of Tesla analysts. But the stock keeps rising and Tesla investors keep making money.

No one is making more money than Elon Musk, Tesla’s chief executive officer, largest shareholder and arguably its most important cheerleader, who just became the third-richest person in the world, according to the Bloomberg Billionaires Index.

RBC Capital Markets analyst Joseph Spak, who has been bearish on Tesla since Jan. 23 2019, when the stock closed at $57.52, put it this way in a note to clients:


“We recognize we underestimated a critical valuation point: seemingly insatiable investor demand for alternative/clean vehicles.”


— RBC’s Joseph Spak

Spak raised his price target to $290 from $170, but his target was still 42% below Monday’s closing price.

See related: His short position just got ‘obliterated,’ but this Tesla bear isn’t giving up.

The stock
TSLA,
-4.67%

soared 13% on Monday, and rocketed 74% in August, the best monthly performance in more than seven years, after a 5-for-1 stock split took effect. On Tuesday, the stock pulled back 4.7% to close at $475.05, after Tesla took advantage of the recent rally to announce a $5 billion share offering.

Also read: Tesla takes advantage of stock’s best month in 7 years with $5 billion offering.

There are some fundamental reasons for investors being right to buy, as Tesla has been profitable for four straight quarters, while Wall Street was wrong to expect losses in three of the past four quarters. And despite concerns about the negative impacts of the COVID-19 pandemic, Tesla delivered way more EVs than expected during the second quarter.

While the 5-for-1 stock split Tesla announced on Aug. 11 didn’t improve the company’s fundamentals in any way, investors were right to buy or hold on to their shares, for now, as the price has charged up more than 80% since the announcement through Monday.

Read more: Tesla stock rally accelerates further into record territory after split takes effect.

Despite such strong investor conviction, 81% of analysts don’t recommend buying.

Of the 36 analysts surveyed by FactSet, only seven, or 19%, have the equivalent of buy ratings on Tesla’s stock. And only one of those analysts, Jefferies’s Philippe Houchois, had a price target — $500 — that was above Monday’s closing price.

Meanwhile, half the analysts had the equivalent of hold ratings and 11 analysts, or 31%, had the equivalent of sell ratings. The average price target of all the analysts was $261.85, according to FactSet, which implied a 47% drop from Monday’s closing price.


FactSet

Most of what analysts have been wrong about Tesla has taken place over roughly the past five months. At the end of March, when the COVID-19 crisis was full blown, there were the same number of bearish analysts as there are now and the average stock price target was $101.86, just 2.8% below the March 31 closing price of $104.80.

With the stock’s gain since then, Tesla’s market capitalization increased to $464.3 billion as of Monday’s close, which was the seventh highest among U.S. companies.

RBC’s Spak suggested that what may also keep supporting the stock is that given the sheer market valuation of Tesla, many portfolio managers have to add to positions “just to keep pace.” He also believes investors have been willing to show more patience and look further into the future to value the stock.

“We still view Tesla as fundamentally overvalued and having to grow into its valuation,” Spak wrote.

Spak recognizes that Tesla is clearly ahead of its competition, has relatively inexpensive access to capital, the ability to attract talent, an “incredible” brand, and understands that “narrative, momentum and other factors” can impact the stock price. But he still believes that ultimately, a company’s value is related to fundamental factors.

Basically, he’s suggesting that one of the biggest risk factors to Tesla’s stock isn’t good or bad fundamental news, but how investors value that news.

Here’s how Tesla’s earnings are currently being valued by investors, through a common metric known as the price-to-earnings (P/E) ratio, and how that compares to the companies that had larger market caps at Monday’s closing prices:

The next major potential news catalyst is Tesla’s “battery day” scheduled for Sept. 22, of which Wedbush analyst Dan Ives said recently he’s expecting a number of potential “game changing” developments. One of those developments is the “million mile” battery, which in theory will support an EV for 1 million miles, which could put Tesla miles ahead of its traditional gasoline-powered automotive competitors.

That said, Ives is one of the analysts that doesn’t recommend buying — he’s at hold — while his price target of $380 suggests the stock could fall 24%.

Year to date, Tesla’s stock has rocketed nearly fivefold (up 468%). In comparison with other EV makers, shares of China-based Nio Inc.
NIO,
+5.72%

ran up 401% this year, Workhorse Group Inc.
WKHS,
+11.26%

soared 563% and Nikola Corp.
NKLA,
+0.46%

climbed 297%. The S&P 500 index
SPX,
+0.75%

has gained 9.2% year to date.

Tesla sees a lot of potential fundamental risks other than valuation

For those looking for actual fundamental risks, the following are just some of those included in the more than 20 pages of “risk factors” Tesla lists in its latest quarterly report filed on July 28. So far, those risks haven’t mattered to Tesla investors.

“We are highly dependent on the services of Elon Musk, our Chief Executive Officer.”

“We have been, and may in the future be, adversely affected by the global COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly harm our business, prospects, financial condition and operating results.”

“We have experienced in the past, and may experience in the future, delays or other complications in the design, manufacture, launch, and production ramp of our vehicles, energy products, and product features, or may not realize our manufacturing cost targets, which could harm our brand, business, prospects, financial condition and operating results.”

“Our future growth and success is dependent upon consumers’ willingness to adopt electric vehicles and specifically our vehicles. We operate in the automotive industry, which is generally susceptible to cyclicality and volatility.”

“Any issues or delays in meeting our projected timelines, costs and production at or funding the ramp of Gigafactory Shanghai, or any difficulties in generating and maintaining local demand for vehicles manufactured there, could adversely impact our business, prospects, operating results and financial condition.”

“If our vehicles or other products that we sell or install fail to perform as expected, our ability to develop, market and sell our products and services could be harmed.”

“The markets in which we operate are highly competitive, and we may not be successful in competing in these industries. We currently face competition from new and established domestic and international competitors and expect to face competition from others in the future, including competition from companies with new technology.”



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5 things to know about Tesla ahead of its 5-for-1 stock split


Tesla Inc.shares will start trading Monday after a 5-for-1 stock split.

Tesla
TSLA,
-0.92%

announced the split on Aug. 11, saying it would “make stock ownership more accessible to employees and investors.”

Shareholders of record as of last Friday will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after the close this Friday.

Apple Inc.
AAPL,
+0.03%

is also trading on a split-adjusted basis on Monday.

Here are five things to know about the Silicon Valley electric-car maker ahead of the split.

A record stock run has boosted market cap to $409 billion

Tesla shares have gained more than 400% this year, hitting 33 record closes in the process. The stock reached the latest on Thursday, when it closed at $2,238.75 and notched an intraday record of $2,295.60.

The stock is up 56% in August, which is shaping up to be its best month since May 2013 and its third best month on record.

See also:Tesla stock propelled higher by BofA and Morgan Stanley upgrades

The stock rally has boosted the company’s market valuation to around $409 billion on Friday, and made it the eighth biggest company in the U.S. by market cap. Tesla’s market valuation places it between Dow Jones Industrial Average components Johnson & Johnson’s
JNJ,
-0.10%

and Visa Inc.
V,
+1.73%

The latest string of records for Tesla came ahead of the stock split as well as a “battery day” that Tesla has set for Sept. 22. Wall Street views the event, a showcase of Tesla’s battery technology, as another potential catalyst for the stock.

Wall Street remains cautious on the stock, for the most part

For all the stock gains, most Wall Street analysts have a cautious view of Tesla.

Of the 36 analysts covering Tesla stock and surveyed by FactSet, 19% rate the stock a buy and 31% rate the stock a sell; the other 50% rate it a hold.

The average price target on Tesla is $1,288,87, or around 42% below its current level.

Tesla’s stock run has lifted the shares of other EV makers

These are heady days for shares of electric-vehicle makers, which several market observers pin at least in part on Tesla’s recent successes and ability to generate a fan base.

Massive investment flows have gone to EV companies such as Nikola Corp.
NKLA,
+6.02%

and China’s Nio Inc.
NIO,
-6.84%
,
Li Auto Inc.
LI,
-8.28%

and X Peng Inc.
XPEV,
+4.80%

have soared post their initial public offering prices. EV maker Fisker Inc. has filed for an IPO.

Analysts at Deutsche Bank have called for General Motors Co. to spin off its electric-vehicle operations and capabilities into a stand-alone company, “which could force the market to recognize its robust EV technology and coming (vehicle) lineup,” they said in a note earlier this month. GM was said to be considering the option.

Wall Street expects S&P 500 inclusion soon

Tesla is slated to become part of the S&P 500 index
SPX,
+0.34%

in the coming months.

The company cleared a major hurdle to index inclusion when it reported in late July its fourth straight quarterly GAAP profit.

Joining a major index would automatically get Tesla shares to the portfolios of thousands of index-tracking funds, and send managed funds scrambling to catch up with it as well.

What else changes on Monday?

Monday will bring changes for the Dow Jones Industrial Average
DJIA,
+0.41%

as well as the Apple and Tesla stock splits.

S&P Dow Jones Indices announced a shake-up earlier this week that goes into effect Monday. ExxonMobil Corp., a Dow component since 1928, will be replaced in the index by Salesforce.com Inc.
CRM,
-2.49%

Pfizer Inc.
PFE,
-0.50%

and Raytheon Technologies Corp.
RTX,
+1.74%

are out as well, replaced by biotech Amgen Inc.
AMGN,
-1.09%

and industrial conglomerate Honeywell International Inc.
HON,
+0.76%

S&P Dow Jones said the changes were prompted by the Apple split, and energy investors have called Exxon’s removal from the index a “sign of the times.” Integrated energy company Chevron Corp.
CVX,
+0.49%

remains a Dow component.



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Which is better? The Tesla Model S and Model 3 compared


Tesla Model S sedan is the car that put Tesla
TSLA,
+3.97%

on the map, and the Model 3 is the vehicle designed to put the company onto the shopping lists of mainstream car buyers. So, we’re going to look at how these two EVs compare when pitted directly against each other.

Is the larger and pricier Model S still the standard-bearer for the Tesla brand? Or does the smaller and less-expensive Model 3 make a bigger and better first impression for potential electric car owners? Let’s break things down into five simple categories:

Price

This should be an easy win for the Model 3, since the compact sedan has a starting price that’s considerably lower than the larger Model S. Check Tesla’s official website and you’ll see the Model 3 starts at $37,990, while the Model S costs a whopping $74,990 for the least expensive variant. Choose the Model S in Performance trim with the optional $8,000 Autopilot package and you’re looking at a starting price that breaks the $100,000 barrier.

The Tesla Model 3.


iStock

The problem for Tesla was when it came to starting production of the entry-level Model 3. For many months, priority was initially given to building the more expensive versions, fitted with a bigger battery pack and all-wheel drive. Start loading options onto a Model 3 and, surprise, the price gap between it and its bigger brother, the Model S, narrows considerably.

Also read: Companies are weighing stock splits after Tesla and Apple’s announcement, expert says

A range-topping Model 3 with the dual-motor and all-wheel drive setup in Performance trim starts at $54,990. Add AutoPilot and you’re looking at a Model 3 that’s close to $62,990. But credit to Tesla, the standard Model 3 is finally online, according to the Tesla website, if you ordered a Standard version now, delivery would take between 6-8 weeks.

As a bonus, no matter which Tesla you choose, you have seven days or 1,000 miles to return the car for a full refund. Considering the entire Model 3 line is finally available, the (belated but deserved) win here goes to Tesla’s entry-level sedan. Winner: Model 3

Power

If you think electric cars have anything to do with golf-carts, then get behind the wheel of a Tesla. These sedans are fast, no matter if you’re going for a Model 3 or Model S. You’ve probably read about the optional Ludicrous mode that’s available in the Model S, which gives it supercar-like acceleration. Punch the gas pedal and the sprint from 0-60 mph takes only 2.4 seconds, according to Tesla. That’s crazy fast and about equal to the acceleration provided in the multimillion-dollar Bugatti Chiron.

A Model 3 in Performance trim is no slouch, however. The same 0-60 run is accomplished in 3.2 seconds and, ironically, it’s the Model 3 that has a slightly higher top speed (162 mph, versus 155 mph in the Model S). But if you’re a speed freak and want the ultimate in near-silent and scary-fast acceleration, the obvious winner is the Model S. Winner: Model S

You might like: What it’s like to drive a Tesla Model Y

Range

For many people considering an electric car, this is the single most important factor. What good is an EV if it can’t get you where you need to go, and then back again. When it comes to range, Model 3 offers a wider overall spread. The standard model goes 250 miles, while the Performance clocks in at 299 miles’ range. The Long Range model boasts 322 miles between charges.  The Model S Performance boasts a range of 348 miles and the Long Range variant can go 402 miles. Winner: Model S

Space

The bigger car is going to provide more interior room, right? You’ll be surprised to learn the Model 3 offers cabin room that’s almost identical to what you get in the larger Model S. In fact, the Model 3 offers slightly more front and rear headroom than the longer and sleeker Model 3. When it comes to front and rear legroom, the two are as close as you can get. Each delivers 42.7 inches of front legroom, with the Model S holding the slightest advantage in rear legroom at 35.4, versus 35.2 in the Model 3. It’s only in hip room and shoulder room where the Model S begins to, ahem, stretch out from its smaller sibling.

Also see: These 3 EVs are the lowest cost to own over 5 years

In terms of cargo space, the Model S streaks ahead with more than 26 cubic feet of trunk space, opposed to about 15 cubic feet in the Model 3. Credit the larger sedan’s convenient rear hatchback, which opens wide and makes cargo-toting a painless process. There is also the option of two rear-facing jump seats available in the Model S, though these are only suitable for small (and brave) young children. Cabin space is close, but cargo room is a clear win for the bigger car. Winner: Model S

New vs. used:

Let’s stir up a little drama by adding a wild card option, a used Model S compared with a brand-new Model 3. We looked at what an average price would be for a 2012 Model S, the sedan’s first year of production. Basing our search in South California and assuming the car has about 55,000 miles, a Fair Market Range according to KBB.com would place the Model S price between $29,000 to $33,000. That’s at least several thousand dollars less than the least expensive Model 3 though admittedly, you have an 8-year-old EV and not a brand-new edition. Still, it’s food for thought if you love the idea of going electric with plenty of power and luxury along for the ride.

Read: How to test drive a used car

Even though it comes up a bit short on range, Model 3’s similar cabin space to the Model S along with performance that’s still jaw-dropping fast are factors that cannot be overlooked. In the end, with the price being a huge factor for most shoppers, it’s the less expensive Model 3 that’s the better EV.

Overall winner: Model 3

Read next:These are your best bets for used hybrids under $10k



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Companies are weighing stock splits, after Tesla and Apple’s announcements, expert says


After Tesla and Apple announced plans to split their shares within weeks of each another, there has been a growing buzz that more companies with triple and quadruple-digit share prices will follow in their footsteps.

“Everybody’s talking about it,” Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, told MarketWatch in an interview on Thursday.

“I’m getting requests from companies looking for raw data… asking, ‘Is there a reason I should split [my shares]?’ he said.

Silverblatt said he thought boards of companies might indeed follow Tesla and Apple’s lead at some point and split their shares in an effort to appeal to a wider retail audience, even if doing so is almost an entirely cosmetic exercise by a company and one that could be expensive.

“Will, there be others that split? I have to say yes. Those [companies] can’t be the only ones,” he said, referring to Apple and Tesla.

Apple
AAPL,
+1.77%

on July 30 announced a 4-for-1 stock split that will take effect on Aug. 31. At the time of its announcement, made after the close of regular trade, shares of the iPhone maker had closed at $384.76. They have gained nearly 20% since then to $460, as of Thursday.

Earlier this week, Tesla
TSLA,
+4.26%

said it would complete a 5-for-1 stock split by Aug. 31, that also sent the electric-vehicle maker’s shares zooming higher.

Stock splits were once a common occurrence on Wall Street, as companies attempted to make their share prices more enticing to average investors.

Back in the late 1990s and early 2000s, amid the dot-com boom, stock splits were all the rage (see attached chart).


Ally Invest, Bloomberg, S&P

But such divisions, of companies creating more shares, are a rarity nowadays.

Indeed, Tesla and Apple are the only stock splits thus far in 2020, even though the average share price among publicly traded companies is $149.32, compared with an average share price of $51.08 in 1997 when there were 102 stock splits, marking the greatest number of splits over the past three decades, S&P Dow Jones Indices data show .


S&P Dow Jones Indices.

The Wall Street Journal in a 2017 article titled the “Split Decision: The Pros and Cons of Splitting Shares,” wrote that beyond appealing to retail investors, making a stock appear more liquid and less overvalued have been among some of the reasons that companies had opted to enact splits.

MarketWatch columnist Mark Hulbert back during Apple’s last announcement of a stock split in 2014 said that stock splits could also be read as a vote of confidence by a company’s management.

“Of course, the stock split itself is simply a cosmetic accounting thing that brings the stock price down. The reason that it’s bullish is that it’s a signal of something that is good news on the fundamental side and that good news is confidence on the part of management that their stock price will not only stay at its current level but keep growing and for that reason they need to split it in order bring the stock price back to a sweet spot,” he explained.

Talk of stock splits now come as mom-and-pop investors find themselves in a veritable golden age of trading, where commissions are at or near $0 and many brokerage platforms offer fractional share ownership of stocks, making purchasing small stakes in companies attainable and relatively low cost.

On top of that, a recent spate of outperformance by retail investors, who have made aggressive and thus far successful bets on the comeback of a number of coronavirus-stricken industries, compared against professionals, has cast a spotlight on investing by a new, young cohort of stock buyers.

That backdrop would presumably weaken the case for stock splits to drive retail ownership but proponents of the move say that fostering an environment that is pro-retail may be a long-term good for the stock market overall and companies.

“Remember, the size of the price tag matters with this [young investing] crowd” and “you want this no-commission paying crowd in your stock,” CNBC’s Jim Cramer said during “Mad Money” on Wednesday.

“This new cohort of investors, the ones who love low-dollar amount stocks, will start buying and holding these best-of-breed names rather than the darned penny stocks,” he said.

Lindsey Bell, chief investment strategist at Ally Invest, wrote last week, after Apple’s announcement that it’s “tough to say if this is the start of a new stock split fad.”

She noted only Netflix
NFLX,
+1.23%

followed Apple’s lead in 2014 when it completed a 7-for-1 stock split in July of 2015.

That said, Bell says that “a little support from companies with expensive stocks could be a big win for those wanting a bite of the Apple (and other big tech/high priced stocks).”

Silverblatt said that there are a number of high-priced companies who might fit the profile of those interested in slashing their share price by virtue of a split.

His data show that there are 63 companies with a share price at or above $250, up from 44, as of Aug 12, 14 companies with stocks at $500 and over, up from 10 at the end of 2019; nine trading at or above $750 a share, up from six, and seven companies boasting a share price of $1,000 or greater, two more than the end of last year, and two issues that carry a price tag of $2,000 a share or better, when there were none at the end of 2019.

CNBC’s Cramer said that he favors a stock split for Amazon.com Inc.
AMZN,
-0.03%
,
Google parent Alphabet Inc
GOOGL,
+0.62%
.
, Chipotle Mexican Grill
CMG,
+2.93%
,
Netflix, Nvidia
NVDA,
+0.02%
,
Adobe
ADBE,
+1.04%
,
Costco Wholesale
COST,
-0.31%
,
Home Depot
HD,
+0.02%
,
Facebook Inc
FB,
+0.54%
.
and Microsoft Corp.
MSFT,
-0.23%

Amazon, whose shares closed at around $3,161 on Thursday, hasn’t split its stock since 1999.

A Wall Street Journal article recently said administrative costs may serve as an additional deterrent to companies considering a stock split, citing an academic paper that pegged the administrative cost of a stock split at around $800,000 for a large company.

That cost for some megalith companies is relatively tiny, particularly if management thinks the long-term value of a split outweighs the expense.

Hulbert, citing a study authored by David Ikenberry, a finance professor at the University of Colorado, says that the average stock undergoing a two-for-one stock split beat the market by 7.9% over the year after the announcement of the split — and by 12.2% over the three years after that announcement.

That said, he acknowledged recently that that split-effect has weakened in recent years.

But it also bears noting that buying a company solely because of a planned split isn’t likely to be a good long-term investing strategy, in any event.



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