Electric carmaker Tesla has invested around eight per cent of its cash holdings in bitcoin, and said it may accept bitcoin from customers in the future as payment for electric vehicles.
The purchase was revealed in a company filing on Monday (US time) and was made possible after Tesla changed certain company policies to allow for investment in “alternative reserve assets”, including digital assets.
The company notes in the filing that the updated policy could also see it “accepting bitcoin as a form of payment for our products in the near future”, albeit “on a limited basis”.
Tesla also states in the filing that it has “invested an aggregate $1.50 billion ($A2 billion) in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term.”
The value of bitcoin surged 9% to a record $US42,709 ($A55,280) after the purchase was revealed, and Tesla CEO and co-founder Elon Musk also pointed to the lesser-known Dogecoin which saw that cryptocurrency also surge in value.
Dogecoin is the people’s crypto
— Elon Musk (@elonmusk) February 4, 2021
Last Monday, Musk flagged the at least partial shift to cryptocurreency, saying in an online chat via the Clubhouse app that he thinks it will gain greater acceptance.
“I think bitcoin is really on the verge of getting broad acceptance by conventional finance people,” he said.
Both bitcoin and Tesla have seen monumental surges in value in the past 12 months, with Tesla’s 490% increase making it one of few “traditional” stocks to outdo bitcoin’s 450% gain since February 2020.
Tesla’s purchase of bitcoin has brought mixed reactions from analysts, some of whom question the wisdom of investing what amounts to 8% of the company’s cash holdings in what has in past years been a volatile stock.
“While Tesla shareholders are reacting positively to the news, it remains to be seen how shareholders would react if a decline in bitcoin’s price negatively affects Tesla’s future earnings,” Jerry Klein, managing director and partner at Treasury Partners based in New York was quoted as saying by Marketwatch.
“CFOs are willing to accept risk in their overall business, but not with the cash on their balance sheet. While bitcoin has been surging in recent months, it’s been very volatile over the past few years,” he said.
But others, such as Joe Osha, a Tesla analyst at JMP Securities, said that Tesla’s investment in bitcoin fits with its disruptive approach to the market, and that arguments of cash flow troubles are out of date.
“I think that there’s this very stale narrative around Tesla’s liquidity that is no longer consistent around its balance sheet or its cash flow generation,” Osha was quoted as saying by Marketwatch.
“I see it as another step in Tesla’s effort to reinvent how cars are sold and delivered to people,” said Osha.
Bridie Schmidt is lead reporter for The Driven, sister site of Renew Economy. She has been writing about electric vehicles since 2018, and has a keen interest in the role that zero-emissions transport has to play in sustainability. She has participated in podcasts such as Download This Show with Marc Fennell and Shirtloads of Science with Karl Kruszelnicki and is co-organiser of the Northern Rivers Electric Vehicle Forum. Bridie also owns a Tesla Model 3 and has it available for hire on evee.com.au.