Elon Musk’s company made about $1 billion on a $1.5 billion Bitcoin investment. Saul Martinez/Getty Images Tesla’s recent revelation that it put $ 1.5 billion of its cash into Bitcoin sparked a flurry of conversation on Wall Street about both the wisdom of the move and what it meant for Bitcoin as a legitimate asset. While analysts and investors were debating, Elon Musk’s company made a cool billion on the trade.
Tesla (ticker: TSLA) disclosed the $1.5 billion Bitcoin buy in its annual report filed with the Securities and Exchange Commission on Feb. 8. In addition to buying Bitcoin, Tesla said it was accepting the digital cryptocurrency as a form of payment for its vehicles.
The investment represented a small percentage of the company’s cash, 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 the disclosure. The S&P 500 and Dow Jones Industrial Average are up roughly 1% over the same span.
Even if investors aren’t sure about putting cash into Bitcoin–historically, a very volatile asset–it’s hard to deny the trade has worked out for the electric-vehicle pioneer. “Tesla so far has made roughly $1 billion of profit over the last month from its Bitcoin investment, given the skyrocketing price of Bitcoin,” wrote Wedbush analyst Dan Ives in a Saturday research note.
Assuming Tesla was purchasing Bitcoin around the time of its fourth-quarter earnings call, the company might have paid about $33,000 per Bitcoin. Prices are up about 70% since then, to more than $57,000, turning Tesla’s $1.5 billion stake into a roughly $2.5 billion stake.
Tesla has reported about $969 million in GAAP net income over the past five quarters. (GAAP earnings are calculated according to generally accepted accounting principles.) Tesla has made more money buying Bitcoin.
The billion-dollar gain, however, is well short of the roughly $65 billion wiped off Tesla’s market capitalization since the disclosure. Other factors, beyond Bitcoin, impact Tesla’s stock price, but based on the early returns, investors may have overreacted to the Bitcoin distraction.
The digital currency now has a market value above $1 trillion .
Ives rates Tesla shares Hold and has a $950 price target for the stock, which closed Friday at $781.30.
Write to Al Root at [email protected]
