Tesla spends $A2bn on bitcoin, and may accept it as payment for EVs

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 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.

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investment in bitcoin fits with its disruptive approach to the market, and that arguments of cash flow troubles are out of date.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.