Stock Market

This Politician Just Bought a Chunk of TSLA Stock. Should You?

Electric vehicle (EV) manufacturer Tesla (NASDAQ:TSLA) is in the headlines once again, as a member of the U.S. House of Representatives recently bought shares of TSLA stock. However, this doesn’t necessarily mean that you have to follow this politician’s trade. After all, Tesla’s quarterly results weren’t spectacular. Furthermore, the company is facing a government investigation (or more precisely, two of them).

According to an old piece of Wall Street wisdom, people sell stocks for many reasons but only buy them because they feel that their value will go up. Thus, it might be tempting to jump into a trade when a prominent politician buys a particular stock.

At the end of the day, though, you have to make your own buying and selling decisions. As we’ll discover, just because one government worker might be bullish on Tesla, doesn’t mean that the company is problem-free.

Which Politician Took a Stake in TSLA Stock?

So, here’s what happened. On Oct. 25, U.S. Representative Michael Garcia of California reported a purchase of TSLA stock. Apparently, the exact amount of this purchase isn’t known.

What is known, however, is that the transaction size fell within a range of $50,001 to $100,000. Okay, so we’re not talking about a gargantuan amount, but it’s sizable for just one person.

Interestingly, this event wasn’t far off from the day that Tesla reported its third-quarter 2022 earnings results. Analysts had expected Tesla to post $21.98 billion in revenue and adjusted earnings of $1 per share. The actual results were basically in line: $21.45 billion in revenue and adjusted earnings of 95 cents per share.

Double Probes Induce Anxiety in Tesla Shareholders

On the heels of quarterly results that were so-so at best, Tesla shareholders now have to deal with not just one but two government investigations. One can only wonder whether Garcia saw this coming or was blindsided like the rest of us.

First of all, the U.S. Department of Justice is investigating Tesla over allegations that the automaker may have “misled customers and investors with claims about its Autopilot technology.”

In addition to that, the U.S. Securities and Exchange Commission (SEC) has initiated a “similar civil investigation” of Tesla. All of this stems back to 2016, when Tesla CEO Elon Musk asserted that his company’s autopilot is “probably better” than a human driver.

Also, a video on Tesla’s website reportedly claimed, “the person in the driver’s seat is only there for legal reasons. He is not doing anything. The car is driving itself.”

So, Should You Buy a Chunk of TSLA Stock?

Will Garcia’s position in Tesla shares gain or lose value? Only time will tell, but there’s no denying that the EV maker has its share of problems now.

The government’s investigations of Tesla could take a while and might not work out in Tesla’s favor. Plus, the company’s third-quarter financial results weren’t overly impressive.

Therefore, you don’t have to buy a chunk of TSLA stock just because a member of Congress decided to take a long position. Instead, consider Tesla’s problems and, when all is said and done, make your own decision.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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