Topic: Did tesla's $1.5 billion bitcoin purchase negatively affect their stock price (Read 592 times)

The fact that people buy from these prices today because they believe it will be even higher in the future shows how Tesla stock buyers are not great at investment methods but they do believe in the company's future, so it evens each other out. Normally Tesla stocks should not worth this much, it should worth less compared to what it is doing today, so today's price is not reflecting on today's finances for the company that's for sure.

However people think that in the future it's going to worth even more than this, as long as electric vehicle line keeps going strong like this and they keep being sold out constantly that means the price of the stock will keep going up, and that is proven on the finances as well, it always grows bigger and bigger, so yes in the future it will be a lot higher but today it is overvalued so it's a very trick situation.

I am not a hater of Tesla/Elon, but I have serious doubts regarding the viability of such crazy valuations. Tesla is now worth $578 trillion (as per the latest market cap from the NASDAQ exchange), but their annual revenue is only around 1/100th of this number. The P/E ratio is 939. Obviously I understand that P/E should be high for new innovations, but the ratio of almost a thousand? It makes me uncomfortable.

That is how haters say when they both dislike bitcoin and Elon Musk. Nothing needs to deal with these people. Apparently, Tesla stocks need to have a correction since it has gone way too far this year and the previous year. It is understandable. Furthermore, the stock price does not affect the operation of the whole business. He is doing great work for both Tesla and SpaceX.  Bezos once said that he does not care about the stock price because if stocks price increase by 30%, it does not mean that we are 30% smarter

Yesterday, there was a tweet from John Pompliano (@JohnPompliano). It goes like this:


However, IMO he missed the most important factor. If someone had purchased Bitcoin worth $77,000 in 2012, then he/she would be having BTC worth $800 million right now. So which one is better? Investing in Tesla stock, or directly investing in Bitcoin? Statistics tells us that the latter option is better.

No way. What was actually happening to Tesla stock was the normal market correction after the price pump. If you look at the Tesla stock price chart for the last 6 months you may notice a huge uptrend so why bother with the little downtrend? just because they invested in bitcoin? That's is a bad call. Even before Tesla invested in Bitcoin they have uptrends and downtrends, so what do you expect? you expect Tesla stocks to go up all the time just because they invested in bitcoin? Oh, come on, you need to think again. the stock market doesn't work like that.

As of now, Tesla is having a virtual monopoly in the mid-range and high-range EV sector and that explains the high valuation. There is no doubt that a P/E of more than 1,000 looks hyperinflated. Even during the dot com boom during the late 90s, most of the tech stocks had a P/E ratio of lower than this. But those who invest in Tesla believe that EV sector will replace gasoline-run vehicles in the near future. As per their expectations, Tesla revenues are going to jump by 10x-20x during the next 10 years (if I am not wrong, then they had ~80% growth in 2020).

Yes, there is no guarantees, but it's a fact Tesla is growing and getting more important each new year very focused in the future, also working with sustainable sources of energy and space exploration, while another automotive companies look more stagnant. Furthermore Tesla isn't disponible in every corner of the world yet, what means they are still in expansion and didn't reach to its full potential yet, but it's really promising.
I think investors wouldn't be fool to put so much money in Tesla if there wasn't a good reason for that.

And electric vehicles are just a part of their business.

There's no guarantee an over-pried stock like Tesla will recover from the mania-induced highs.  Tesla is worth more than Ford, Honda, BMW, GM, Daimler, Volkswagen, and Toyota combined and yet produced a tiny, tiny fraction of the cars.  Tesla's revenues was about 30 billion last year while the revenue of the other 7 car makers was 1.1 trillion.  There's absolutely no way Tesla is worth this price, or will ever grow into this valuation.  It's still priced like it will be the only EV producer forever.

With Tesla's bitcoin purchase I believe they incentivized investors around to also buy bitcoins. Naturally, potential Tesla's investors, those who are sympathetic to their ideas might have followed this incentive, putting their funds in bitcoin and letting the company's stocks aside a little bit. But this fall in stocks price is temporary. Tesla is a great innovative company and will recover soon.

No ,i dont buy this theory because Tesla stock was not the only one tanking at the time. All the tech sector stocks started to tank at the same day. Although  this was huge news for crypto and BTC , the amount for Tesla's treasury was not that high to initiate some kind of negative response.

In a way, that argument is correct. The Bitcoin holdings (even at current exchange rates) represent less than 0.5% of the market cap of Tesla. Even if we take the volume of cash reserves, the $3 billion worth of coins only constitute a small fraction. Tesla is an EV manufacturer and unlike the case with Microstrategy, it's share price and market fundamentals will be decided by the performance of its EV business.

Today there is a very positive trend in changing the priorities of many motorists. Very often, car enthusiasts buy electronic cars, which are much cheaper to maintain and maintain. It is Tesla that is the brand that sits in the middle between expensive and cheap cars.But the biggest problem with Tesla cars is the build quality. The fact that stock prices have been falling until today may be primarily the influence of competition in the market, but nevertheless it is worth mentioning the fact that after investing in bitcoin, the cryptocurrency rate has very much pulled ahead, but after a time of practically simultaneously Tesla shares and Bitcoin fell in price by several positions, and today Tesla shares and the Bitcoin rate are recovering in price almost simultaneously.

Agreed I dont think they are tied together its just tesla was probably a bit overvalued there was going to be a correction eventually and just because their decline was just a coincidence probably

The bitcoin investment just isn't a needle mover for Tesla due to how small it is compared to the overall market cap of the company.  Bitcoin could triple and it would mean next to nothing for the company's overall value and it could go to 0 and have the same relative non-effect.  It's not like Microstrategy, the marketcap of which is predominately bitcoin-related at this point.

Agree, Bitcoin is not negative reasons that affect Tesla's stock value because the budget for investing in bitcoin is not small and a large company will inevitably require voting on such decisions, making the investment proves that shareholders accept and support, Covid had a significant influence on Tesla, and the decision to make money online was not wrong. Even now, this plan is still worthy as it may have reduced some of the pressure on stock prices to drop, plague, the change in president and economic war are probably the leading causes of stock devaluation

If I am not wrong, the net worth of BTC held by Tesla is around $3 billion now, which represents a 100% appreciation from their purchase price in January 2021. It is difficult to quote an exact figure, because Tesla hasn't released those numbers. But we can make assumption based on the date of their purchase. Some of the shareholders are angry, because they think that Elon made this decision (to purchase BTC) without consulting them.

Despite the criticism of Tesla for buying $ 1.5 Billion of Bitcoin, I think the main reason for the decline in Tesla's stock price is not because Tesla
bought Bitcoin. Especially after Tesla bought Bitcoin in February, Bitcoin price continues to rise until now. Tesla investors should have known that
Tesla's steps were not wrong. In my opinion, Tesla's stock price has decreased because from the start it was overvalued, we can see that in
the past year, the increase in Tesla's stock price has increased significantly. So I don't agree that what Tesla did by buying Bitcoin had a negative
effect on their stock price.

imagine that 'supplychain costs are $1.5m/quarter'
so they have $6bill a year of 'cashflow' to cover those costs for the year

well unable to buy stuff in Q3 means your hanging onto $1.5b that should have been used.
this can cause issues with:
a. seeking 2021 investment. as having cash unspent wont attract people to want to hand more over
b. tax offices will see that $1.5b cash and take a nice bite out of it.

so the smart option.. invest $1.5b into something. so that you can treat it as a tax loss for 2020
yes when you exit the investment in the future you have to declare it as a taxable income. but atleast the amount taken will be less if you then get to spend the $1.5b on supplychain stuff before the end of 2021

yes many smart businesses want to declare losses for tax avoidance. a hit on the share price is less than the hit on the tax bill
share prices can recover. but you cant recover the tax taken

oh and by the way. elon bought btc in december. his primary share holders (board members) knew this..
the share price dip in february. was social drama triggered by a collection of many factors which swayed the smaller share holders away.
it was a combination of
the PUBLIC february news about investment.
the supplychain issues
tesla US cars are recalled due to faulty touch screen
tesla china cars recalled due to battery issues and unintended acceleration
other manufacturers launch their competitive cars

Unrealized gains absolutely figure into the stock price of a company. Berkshire has a public stock portfolio in the billions of dollars, and the stock price of Berkshire absolutely reflects the unrealized gains and losses of those assets.  It applies to every company.  Microstrategy has unrealized bitcoin gains, and MSTR's stock price rises and falls with the price of bitcoin because of how much they hold.  I agree with you that I don't see Tesla's investment in Bitcoin being enough to significantly move the needle for them when Bitcoin rises or falls, but investors still take into account Tesla's assets when make a valuation decision on the business.

But in reality it doesn't look like Tesla is doomed or anything. They are recovering little by little



and even if antiBitcoin investors are leaving them now, it looks like Tesla will perfectly survive without them. I even predict their rejoining the company later, when they become pro-Bitcoin like anybody else.