Elon Musk’s company made around $ 1 billion on a $ 1.5 billion Bitcoin investment.
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Teslas’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, the Elon Musks company was making a billion euros on the trade.
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(ticker: TSLA) revealed the purchase of $ 1.5 billion worth of Bitcoin in its Annual Report filed with the Securities and Exchange Commission on Feb.8. In addition to purchasing Bitcoin, Tesla said it accepts digital cryptocurrency as a method of payment 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 put money into Bitcoin historically, a highly volatile asset that it’s hard to deny trading has 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 research note. 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 Teslas’ $ 1.5 billion stake into a stake of around $ 2.5 billion.
Tesla reported GAAP net income of approximately $ 969 million in the past five quarters. (GAAP profits are calculated using generally accepted accounting principles.) Tesla made more money buying Bitcoin.
The billion dollar gain, however, is far less than the roughly $ 65 billion wiped out of Teslas’ market cap since disclosure. Other factors beyond Bitcoin are impacting the Teslas 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.
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