Tesla Just Bought $1.5 Billion in Bitcoin, and It Could Mean the End of Tesla

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Elon Musk is known for some pretty extraordinary stunts. He’s picked fights on Twitter and even sparked an investigation by the SEC. He also egged on traders who piled into GameStop stock last month as it soared from $59 to more than $396 in just a week. 

Of all the audacious things Elon Musk has done, however, this may top the list. That’s saying a lot. 

On Monday, in a filing with the SEC, Tesla disclosed that it had purchased $1.5 billion worth of bitcoin. The revelation that Tesla has put almost 8 percent of its cash (based on its most recent balance sheet) into bitcoin sent its price soaring, approaching $50,000 each. That came after Musk had been pushing cryptocurrencies on Twitter, which have driven the price up as much as 20 percent, even before the disclosure.

Look, Tesla makes very nice cars. Almost everyone I know who has ever owned one is very happy with their purchase. I don’t have anything bad to say about the cars–or, for that matter, the company’s mission. The thing is, this doesn’t have anything to do with either. That’s the problem. 

Expensive and Volatile

To be fair, Tesla isn’t the only company to buy bitcoin, but Tesla isn’t Square, and it isn’t Twitter. Arguably, it makes sense for Square, a financial services company, to own and accept bitcoin. I’m not so sure it makes any sense for Tesla, a company that requires capital to make investments in things like R&D and manufacturing.

Tesla’s move into bitcoin represents an investment of a significant percentage of its cash in the investment. The company had more than $19 billion in cash and cash equivalents on hand at the end of 2020, according to its most recent filing.

The moves raise questions around CEO Elon Musk’s recent behavior on Twitter, where he has been credited for increasing the prices of cryptocurrencies like bitcoin and dogecoin by posting positive messages that have encouraged more people to buy the digital currencies.

Two weeks ago, the billionaire Tesla owned added the hashtag #bitcoin to his Twitter bio, a move that helped to briefly push up the price of the cryptocurrency by as much as 20%. Two days later, he said on the social medial chat site Clubhouse: “I do at this point think bitcoin is a good thing, and I am a supporter of bitcoin.”

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