Elon Musk And His Rare Insider Trading Signal
Zacks Investment Research | Feb 26, 2020 02:58AM ET
What do Elon Musk and Mary Dillon have in common?
Both are CEOs who have bought shares of their own companies just before the share prices moved higher.
You have probably heard of Elon Musk, the CEO of Tesla (NASDAQ:TSLA). In 2013, he made a big statement by buying over a million shares of Tesla stock for $100 million even though he already had plenty of shares.
Musk went out on the limb even further, as he had to borrow the money from Goldman Sachs (NYSE:GS) to buy the shares. He used his previous holdings in Tesla, and stakes in other companies, as collateral.
Since the May 2013 purchase, shares of Tesla are up over 500%.
But who is Mary Dillon?
She’s the President and CEO of Ulta Beauty (NASDAQ:ULTA), a cosmetics and beauty product retailer with stores across the United States.
The CEO of Ulta bought nearly a million dollars of shares on the open market in March 2014 and September 2014.
Since the March 2014 purchase, shares are up 216%.
Doubling Down in 2019
But these two CEOs didn’t stop there.
In 2019, after the shares of both Ulta and Tesla took a dive, both CEOs saw yet another buying opportunity.
Dillon, the CEO of Ulta, bought $300,000 worth of shares in September. It was her first open market purchase since the 2014 buys.
Musk, Tesla’s CEO, bought $25 million in May 2019.
These CEOs were doubling down on their own companies in 2019.
And Musk didn’t stop there. In 2020 he was at it again.
On Feb 14, 2020, he bought yet another $10 million worth of stock, even though the shares had soared to $767.
This is a rare insider trading signal: the insider who steps in to buy again.
Insider Buying Sends a Strong Signal
Why would these two CEOs spend so much of their money on their own companies’ stock, and double down again last year, when they already own a ton shares already?
Greed!
Pure and simple.
The opportunity to make more money motivates people- even people who are already billionaires like Elon Musk.
If top insiders are buying, it’s because they know something very good is going on at the company. Maybe it is a new product. Or contract. Or pending merger.
Whatever the reason, they are very confident that shares will be on the rise. After all, who would buy more stock in a company if they knew it was sinking???
More . . .
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