As Tesla, Inc. (TSLA) stock plunged almost 50% in the first quarter of 2025 from its mid-December peak, board members and an executive at Elon Musk’s company off-loaded over $118 million in shares, with profits to them of about $100 million. The selloff raised the question: When should investors be worried about insider selling for stocks they own?
“If the executives are selling under a plan they filed six or nine or 12 months prior, that’s fundamentally a different thing from an open sale that wasn’t part of that plan,” said George Pearkes, a macro analyst at Bespoke Investment Group.
Key Takeaways
- Insider selling through predetermined 10b5-1 plans is often routine and less concerning than unexpected, unplanned sales.
- Several executives selling large portions of their holdings simultaneously outside of trading windows is a bigger warning sign than isolated transactions.
- Investors can track insider transactions through SEC Form 4 filings.
Pearkes highlighted the importance of Rule 10b5-1 trading plans, U.S. Securities and Exchange Commission (SEC)-approved arrangements that allow company insiders to schedule future stock transactions in advance. These plans create a legal shield for executives who might otherwise face scrutiny or insider trading allegations.
While some Tesla insiders’ sales were made under these preset plans, others weren’t and coincided with Tesla’s largest single-day decline in five years, raising eyebrows. Below, we take you through what to watch for when company leaders start selling their stock, and when these sales should—or shouldn’t—make you worry.
Why Insiders Sell Their Stock
When corporate insiders sell company shares, that’s not necessarily a sign of trouble.
“It’s important to understand nuance,” Pearkes said. “Are the [sales of] shares preplanned? How large are the sales relative to the insiders’ holdings? Have they historically sold shares on a consistent basis or not?”
The way executives are compensated at most public companies means much of it is in equity stakes. As such, many executives with their wealth tied up in a single company stock would want to diversify their portfolio.
Common reasons for insider selling include the following:
- Paying taxes on vested stock options
- Major personal expenses like buying a home or funding a child’s education
- Portfolio rebalancing for diversification
- Retirement planning
“The best scenario for a sale is that it’s a person with relatively large holdings, who takes a lot of their compensation in shares, and they’re doing 10b5 sales to get a bit of liquidity but aren’t really selling that much,” Pearkes said.
In Tesla’s case, board member James Murdoch’s $13 million sale in March 2025 (see below) came from exercising stock options that would expire in 2025.
When James R. Murdoch, a Tesla board member, sold $13 million in stock on one of the company’s worst days of trading in five years, March 10, 2025, he had to file Form 4 for the SEC, which notes the reasons for the sale.
Red Flags: When Insider Selling Is Concerning
While many insider sales are routine, certain patterns should raise concerns among investors.
“The worst-case scenario is when insiders all start selling in rapid succession, with large sales relative to what they hold, and on relatively short notice,” Pearkes said.
This could mean that they share knowledge about adverse developments that are not yet public. Other worrisome patterns include the following:
- Insiders selling in the face of optimistic public statements
- Unusually large volume sales representing significant portions of holdings
- Sales occurring outside normal company trading windows
- The cancellation of 10b5-1 plans followed by new sales
Important
Insider trading becomes illegal when a person buys or sells securities based on material, nonpublic information.Â
Where To Find Insider Trading Information
An investor’s primary source is SEC Form 4, which insiders must file within two business days of any transaction. These forms are available to the public through the SEC’s EDGAR database.
Recent SEC rule changes now require a checkbox on Form 4 to explicitly reveal when transactions are made under 10b5-1 plans. That’s where you want to look first.
Other helpful resources include companies’ investor relations websites and financial news services that track insider transactions.
The Bottom Line
When company leaders sell their stock, context matters more than headlines. Insider selling through planned 10b5-1 arrangements more often than not represents normal portfolio management rather than a vote of no confidence. However, when multiple insiders are making large, unplanned sales—particularly during challenging times for the company—you should take notice and review your holdings.