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Elon Musk’s company made around $ 1 billion on a $ 1.5 billion investment in Bitcoin.
Saul Martinez / Getty Images
Tesla’s recent revelation that he invested $ 1.5 billion of his money in Bitcoin sparked a wave of conversations on Wall Street about both the wisdom of the move and what it meant for Bitcoin as a legitimate asset. While analysts and investors debated, Elon Musk’s company was making a billion euros on the trade.
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(ticker: TSLA) disclosed the $ 1.5 billion purchase of Bitcoin in its annual report filed with the Securities and Exchange Commission on February 8. In addition to purchasing Bitcoin, Tesla said it accepts digital cryptocurrency as a payment method for its vehicles.
The investment was a small percentage of the company’s cash flow and a very small fraction of its market value, but the news seemed to make investors a little nervous. Tesla stock is down about 8% since disclosure. The
S&P 500
and
Dow Jones Industrial Average
are up about 1% over the same period.
Even though investors aren’t sure if they are putting money into Bitcoin – historically a very volatile asset – it’s hard to deny that trading worked for the electric vehicle pioneer. “Tesla has so far made around $ 1 billion in profit over the past month from its investment in Bitcoin, given the soaring price of Bitcoin,” Wedbush analyst Dan Ives wrote in a note. search Saturday.
Assuming Tesla was buying Bitcoin at the time of its fourth quarter earnings call, the company might have paid around $ 33,000 per Bitcoin. Prices have risen by around 70% since then, to more than $ 57,000, turning Tesla’s $ 1.5 billion stake into a stake of around $ 2.5 billion.
Tesla reported GAAP net income of around $ 969 million in the past five quarters. (GAAP profits are calculated using generally accepted accounting principles.) Tesla made more money by buying Bitcoin.
The billion dollar gain, however, is far less than the roughly $ 65 billion wiped out of Tesla’s market cap since disclosure. Other factors, beyond Bitcoin, are impacting Tesla’s share price, but based on early returns, investors may have overreacted to the Bitcoin distraction.
Digital currency now has a market value of over $ 1 trillion.
Ives values Tesla Hold shares and has a price target of $ 950 for the stock, which closed at $ 781.30 on Friday.
Write to Al Root at [email protected]
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