Analysis: Investors lukewarm on Tesla’s $1.5 billion bitcoin splurge

Investors in high-flying electric carmaker Tesla Inc are questioning whether Elon Musk’s $1.5 billion outlay into bitcoin will be as good for the company as it has been for the cryptocurrency. Tesla’s disclosure on Monday that it had moved nearly 8% of its reserves into bitcoin sent the price of the cryptocurrency to all-time highs, up more than 16% this week, while Tesla’s shares are down nearly 6%. Others may follow Tesla’s lead, with Twitter Inc’s chief financial officer telling CNBC that the company has considered adding bitcoin to its balance sheet.

Shareholders voiced concern that the investment by Tesla, which recently joined the benchmark S&P 500 stock index, could fuel more gyrations in the company’s shares. “It will add volatility to the stock due to exposure to bitcoin,” said King Lip, chief strategist at Baker Avenue Wealth Management, whose firm has owned Tesla shares since 2015. “This is better for bitcoin than it is for Tesla.”

Gary Black, former chief executive of Aegon Asset Management and now a private investor who has been bullish on Tesla since 2019, on Monday announced here on Twitter that he had sold his Tesla shares. He cited the absence of a 2021 delivery target and the company’s riskier capital allocation strategy, among other reasons.

Black also tweeted here on Monday: “$TSLA has always been higher risk, but investing $1.5B in #Bitcoin makes it more risky.” He did not respond to a request for comment.

The difficulty of valuing the notoriously volatile cryptocurrency over the long term was also a cause for concern to investors.

“Elon Musk has exposed Tesla to immense mark-to-market risk,” Peter Garnry, head of equity strategy at Saxo Bank, wrote in a research note, referring to an accounting method designed to measure the fair value of accounts — assets and liabilities — in order to provide a measure of current financial performance.

Analysis: Investors lukewarm on Tesla’s $1.5 billion bitcoin splurge, Reuters, Feb 11