Did tesla's $1.5 billion bitcoin purchase negatively affect their stock price

[Hydrogen]

A controversial topic.  

Some claim Elon Musk and tesla are being battered for allocating $1.5 billion in assets in BTC. Others say tesla's stock crashing post february 8th is an amazing coincidence entirely unrelated to that move.

One of the more tangible pieces of evidence emerging are supply chain disruptions freezing automotive factory lines.

Supply chain disruption for semiconductors to the automotive sector

Since the back end of 2020 there have been reports of disruption within the supply chain of semiconductors to the automotive sector. Pressure built up as the automotive industry recovered from the widespread lockdowns experienced during the first half of 2020 and that recovery cycle clashed with increasing demand from the wider consumer electronics sector, which was itself recovering strongly and late in the year, building stocks for the holiday season.

As a result of these pressures, light vehicle manufacturers are finding increased disruption to the supply of systems using semiconductors in the first quarter. At this stage, with varying levels of visibility across the supply chain, the biggest volume disruption is noted in Mainland China where, based on available information, the risk could be 250,000 units in the first quarter. Additionally, in Europe, where less immediate detail is available, losses could total 100,000 units for this quarter. Production levels in North America, Japan and India are also expected to be negatively affected during the quarter. In other regions the risk is evident but it is less significant at this stage.

https://ihsmarkit.com/research-analysis/supply-chain-disruption-for-semiconductors-to-the-automotive-s.html

It is interesting to note other automakers like ford and toyota have not experienced the massive stock devaluation tesla has. Ford's stock price is actually higher today than it was feb 8th. Internal combustion engine manufacturers aren't as reliant upon rare earth metals the way that EV makers like tesla are. Perhaps this discrepansy can be explained by regional differences and material demands.

Long story short, your mission should you choose to accept it. How would you explain tesla's stock movements from february 8th to the present. There are always many threads and posts being made on this forum about trading. Many lessons in historical markets translate to trading crypto and HODL. In that sense this topic could be worthwhile to discuss.

Was pornhub punished for its bitcoin adoption. Is tesla being punished now. Or were there other factors, history and forces in play which prove the conspiracy theories wrong.

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[Darker45]

Apparently, there were criticisms against Tesla for buying more than a billion USD worth of Bitcoin. It might have affected their stock one way or another.

The criticisms are coming from all sides. Of course, some from Wall Street would consider such a financial move a silly one or at least a very risky one, considering that Bitcoin is still being treated as a foreign and unpredictable asset to them, a young emerging one which is too volatile.

Another criticism is directed at Tesla being the poster boy of clean energy, the standard bearer of electric cars, the well-loved technology for being sensitive to the urgent environmental issue of climate change. An investment into an energy-gobbling Bitcoin made a lot frown.

All this and other reasons must have pushed investors to sell Tesla stocks.

However, at the end of the day, if the primary goal was an increase in worth or to make profit, it seems Tesla has made the best move. Around a billion in profit was already registered from its Bitcoin investment after only a relatively short period of time. And it appears Tesla has made more profit from its Bitcoin investment than from its 2020 EV car sales. ^[1]

But all these criticisms are nothing new and nothing strange. It seems to me the big traditional players won't just allow anybody to jump into the other side unscathed. They would never make it easy for billions to enter into Bitcoin, their nemesis. They would certainly put up a fight. No wonder why MicroStrategy’s stock was suddenly downgraded to sell rating by Citigroup after actual Bitcoin purchases were made.

[1] https://www.cnbc.com/2021/02/22/tesla-has-made-1-billion-profit-on-its-bitcoin-investment-analyst.html#:~:text=Menu-,Tesla%20has%20made%20about%20%241%20billion%20in,its%20bitcoin%20investment%2C%20analyst%20estimates&text=Tesla%20has%20made%20roughly%20%241,analyst%20at%20Wedbush%20Securities%20estimated.

[Sithara007]

I don't understand how the purchase can negatively affect their stock price, when they received a huge profit from the transaction. The value of the coins purchased by Tesla in January 2021 stands at around $2.5 billion now, which represents a profit of $1 billion. And more importantly, this is more than the profit that Telsa earned by selling their electric vehicles for the entire year of 2020.

[amishmanish]

Has nobody noticed how degen Elon can be with his tweets about crypto. The guy is having fun behaving like some shill with memes about crypto and especially, DOGE. This is typical of him though. I assume he has only started to seriously look into the technology and the almost disruptive, irreverent nature of crypto. He loves that vibe. And he sends out memes about "We hate SEC".

He is obviously Earth's greatest genius at present but he is not immune to having some fun in his idiosyncratic ways. So is it any surprise that the behavior may have rattled a few old-school investors?

[zanezane]

I don't understand how the purchase can negatively affect their stock price, when they received a huge profit from the transaction. The value of the coins purchased by Tesla in January 2021 stands at around $2.5 billion now, which represents a profit of $1 billion. And more importantly, this is more than the profit that Telsa earned by selling their electric vehicles for the entire year of 2020.

AFAIK it doesn't have anything to do with the purchase, there was a rival company named Rivian that was preparing their IPO as we all know, competition means that you have to lower your prices because you need to attract customers which in turn will cause your revenue to go down and then your stock prices, in fact I think the purchase actually made a positive impact on the stock prices of Tesla, as @Sithara007 said, there was a 1 billion profit.

[jaysabi]

Tesla's stock decline is because the company was insanely overvalued to the point of absurdity. It's valued like it's going to be the only company that ever produces electric vehicles. Once you dispel that notion as obviously wrong, it's easy to see how overvalued the company is.  Aside from valuation, all tech stocks are getting hammered as treasury yields rise right now.  That's not specific to Tesla, it's pretty much across the board.  I wouldn't say that Tesla buying bitcoin is why it's down, but the sideshow it creates isn't doing the company any favors.

[jaysabi]

I don't understand how the purchase can negatively affect their stock price, when they received a huge profit from the transaction. The value of the coins purchased by Tesla in January 2021 stands at around $2.5 billion now, which represents a profit of $1 billion. And more importantly, this is more than the profit that Telsa earned by selling their electric vehicles for the entire year of 2020.

No, at current prices the stake is likely only up $600m.  I say "likely" because I haven't been able to find any place where Tesla disclosed how many bitcoins they bought.  Their SEC filing only disclosed that they bought $1.5B worth in January 2021.  I've seen speculation that the price was $33,000, but nobody knows for sure.  If it was $33,000, that would give you a $600m unrealized gain at current prices, which is considerably less than what you posted.

As for why this could negatively impact Tesla, it's because investors don't want the sideshow of Bitcoin interfering with the company when it should be focusing on growth and solving its numerous quality problems. Making money on bitcoin is not a business model, the company needs to build and sell good cars to make money.

[Vishnu.Reang]

I don't understand how the purchase can negatively affect their stock price, when they received a huge profit from the transaction. The value of the coins purchased by Tesla in January 2021 stands at around $2.5 billion now, which represents a profit of $1 billion. And more importantly, this is more than the profit that Telsa earned by selling their electric vehicles for the entire year of 2020.

AFAIK it doesn't have anything to do with the purchase, there was a rival company named Rivian that was preparing their IPO as we all know, competition means that you have to lower your prices because you need to attract customers which in turn will cause your revenue to go down and then your stock prices, in fact I think the purchase actually made a positive impact on the stock prices of Tesla, as @Sithara007 said, there was a 1 billion profit.

If their products are really good, then they don't need to bother about competition. I guess the issue is that investors are concerned about the high P/E ratio of the TSLA stock. The ratio currently stands at 975, and it was as high as 1,700 a few months back. They are still having a market cap of $600 billion, which sounds a bit high, considering the fact that their net annual income is less than $1 billion.

[zanezane]

~

If their products are really good, then they don't need to bother about competition. I guess the issue is that investors are concerned about the high P/E ratio of the TSLA stock. The ratio currently stands at 975, and it was as high as 1,700 a few months back. They are still having a market cap of $600 billion, which sounds a bit high, considering the fact that their net annual income is less than $1 billion.

Doesn't matter, look at Apple, they clearly have a mediocre and expensive product but they have a trillion dollar market cap. General customer doesn't care about quality, you have to take note that not everyone is rich or financially healthy, if the market introduces something cheaper despite quality or if the product can make you look like you have a place in high society, the general population will bite it.

[jaysabi]

~

If their products are really good, then they don't need to bother about competition. I guess the issue is that investors are concerned about the high P/E ratio of the TSLA stock. The ratio currently stands at 975, and it was as high as 1,700 a few months back. They are still having a market cap of $600 billion, which sounds a bit high, considering the fact that their net annual income is less than $1 billion.

Doesn't matter, look at Apple, they clearly have a mediocre and expensive product but they have a trillion dollar market cap. General customer doesn't care about quality, you have to take note that not everyone is rich or financially healthy, if the market introduces something cheaper despite quality or if the product can make you look like you have a place in high society, the general population will bite it.

Apple has a two trillion dollar market cap because it generates gobs of cash every quarter, and they don't generate that much cash with a mediocre product.  If it was truly mediocre, they would be replaced by anyone doing it better, but the fact remains their ecosystem as a whole blows all others out of the water.  Despite the two trillion dollar market cap, the PE ratio is only in the very low 30s, which is pretty par for tech companies.  Tesla on the other hand is priced like there will never be competition for electric vehicles, despite the fact that there already is and it's only going to get worse as every major automaker is pledging to be fully electric in the coming years. With Tesla's poor quality issues currently (car fires, software update glitches, hardware failures and Elon's dismissive attitude saying people shouldn't expect the hardware to last the life of the car anyway) Tesla's higher end models will be second fiddle to Porsche, Audi, Lexus and other luxury automakers. Tesla had first mover advantage in scaling electric vehicles in a meaningful way first, but very soon that will be the only thing that differentiates them from other luxury automakers and then it will rest on quality alone.

[mu_enrico]

Yes, the bitcoin purchase has a negative effect, but it's just one of many reasons why Tesla's stock price plummets. The stock market relies more on the company's bottom line, and Tesla missed it early this year, and based on the price action, investors think they will not deliver again. It's like when you give money to someone to work, but he doesn't deliver and use a small portion of the money to speculate.

[Vishnu.Reang]

Apple has a two trillion dollar market cap because it generates gobs of cash every quarter, and they don't generate that much cash with a mediocre product.  If it was truly mediocre, they would be replaced by anyone doing it better, but the fact remains their ecosystem as a whole blows all others out of the water.  Despite the two trillion dollar market cap, the PE ratio is only in the very low 30s, which is pretty par for tech companies.  Tesla on the other hand is priced like there will never be competition for electric vehicles, despite the fact that there already is and it's only going to get worse as every major automaker is pledging to be fully electric in the coming years. With Tesla's poor quality issues currently (car fires, software update glitches, hardware failures and Elon's dismissive attitude saying people shouldn't expect the hardware to last the life of the car anyway) Tesla's higher end models will be second fiddle to Porsche, Audi, Lexus and other luxury automakers. Tesla had first mover advantage in scaling electric vehicles in a meaningful way first, but very soon that will be the only thing that differentiates them from other luxury automakers and then it will rest on quality alone.

Agreed 100%. Absolutely spot on. Apple is still generating huge amounts of profits and compared to that it's market capitalization is not very high. Tesla on the other hand is an inflated balloon. It's valuation is so high, because the investors assume that it's revenues will jump by 10x or 25x in the next few years. They have the momentum with them, but competition is getting tougher in the EV sector.

[SneaKyXy]

We'll see how it goes long-term.

[Hydrogen]

Around a billion in profit was already registered from its Bitcoin investment after only a relatively short period of time. And it appears Tesla has made more profit from its Bitcoin investment than from its 2020 EV car sales. ^[1]

[1] https://www.cnbc.com/2021/02/22/tesla-has-made-1-billion-profit-on-its-bitcoin-investment-analyst.html#:~:text=Menu-,Tesla%20has%20made%20about%20%241%20billion%20in,its%20bitcoin%20investment%2C%20analyst%20estimates&text=Tesla%20has%20made%20roughly%20%241,analyst%20at%20Wedbush%20Securities%20estimated.

Tesla made a bigger profit buying bitcoin than the profit made from their entire operation. Hilarious!

Reminds me of space x venturing into the satellite internet business (starlink) when they realized satellite ISPs have bigger profit margins than space x itself did.

Tesla's stock decline is because the company was insanely overvalued to the point of absurdity. It's valued like it's going to be the only company that ever produces electric vehicles. Once you dispel that notion as obviously wrong, it's easy to see how overvalued the company is.  Aside from valuation, all tech stocks are getting hammered as treasury yields rise right now.  That's not specific to Tesla, it's pretty much across the board.  I wouldn't say that Tesla buying bitcoin is why it's down, but the sideshow it creates isn't doing the company any favors.

I think tesla's stock value surged after their recent presentation unveiling new technology scheduled to be rolled out in 2022. They plan to license their new EV technology to global automakers in addition to utilizing it in house. They may also have a tesla EV they plan to market at $20k to $30k in 2022. Which could represent the price range many would like to buy a tesla but previously couldn't afford it. There is also the tesla cybertruck which is due out in 2022.

[Sithara007]

I think tesla's stock value surged after their recent presentation unveiling new technology scheduled to be rolled out in 2022. They plan to license their new EV technology to global automakers in addition to utilizing it in house. They may also have a tesla EV they plan to market at $20k to $30k in 2022. Which could represent the price range many would like to buy a tesla but previously couldn't afford it. There is also the tesla cybertruck which is due out in 2022.

I don't know how much impact the new technology will have on Tesla sales. Right now, the cars from Tesla costs at least 4-5 times that of a gasoline-run vehicle with the same specs. People go for Tesla, because it has become a status symbol, or because they are concerned about global warming and pollution. And even $30K is still a lot. You can purchase a Chevrolet Sonic or Hyundai Accent for less than half of that price.

[Hydrogen]

Right now, the cars from Tesla costs at least 4-5 times that of a gasoline-run vehicle with the same specs.

Teslas do 0 to 60 mph performance times ranging from 2.5 seconds to 4 seconds. Teslas are faster than supercars like ferraris and lamborghinis which are far more expensive.

Teslas offer supercar performance in an EV with quality craftsmanship and dependability on top of high fuel efficiency, while being good for the environment and helping end dependance on fossil fuels. Futuristic extras like AI autopilot technology -- definitely a plus. On paper analysts trend towards looking only at price and range, which prevents them from seeing the big picture.

I watched presentations on tesla's planned tech unveilings for 2022 and have to say they're impressive. Could be game changing for EV markets and battery manufacturing. They managed to reduce if not eliminate dependance on cobalt for their batteries which was one area EVs were criticized for due to cobalt mining industries being dependant upon child and slave labor in africa.

[The Sceptical Chymist]

Apparently, there were criticisms against Tesla for buying more than a billion USD worth of Bitcoin.

No doubt, and it seems like there's a huge difference between Tesla investors and MicroStrategy investors--the latter seem to like the fact that their company purchased a massive amount of bitcoin.

But just based on that graph (which is a very short timeline), I'm not completely convinced that Tesla's bitcoin purchase is responsible for their stock price dipping.  The entire market is overvalued right now, and I'm kind of surprised that more stocks aren't starting to slide.  Plus, as we all know, correlation doesn't mean causation.

[magneto]

I honestly don't think that is the case.

BTC prices have only moved in the positive direction since Tesla's announcement. It makes no sense for that portion of Tesla's $1.5b holdings (which is minuscule compared to their half a trillion market cap) would result in a 30% correction in their common stock.

I think people are just starting to realise that Tesla is insanely overvalued right now with a P/E ratio of nearly 1000 (for context, average P/E is usually about 20, overvalued is around 30). There is simply no stable cash flow to justify this absurd rally.

[Sithara007]

I honestly don't think that is the case.

BTC prices have only moved in the positive direction since Tesla's announcement. It makes no sense for that portion of Tesla's $1.5b holdings (which is minuscule compared to their half a trillion market cap) would result in a 30% correction in their common stock.

I think people are just starting to realise that Tesla is insanely overvalued right now with a P/E ratio of nearly 1000 (for context, average P/E is usually about 20, overvalued is around 30). There is simply no stable cash flow to justify this absurd rally.

Tesla is heavily overvalued and there is no doubt about it. One year back, the stock was trading at around $100, and by this January the prices had increased to $880. The stock price increased by almost 9 times, but there was no similar increase in the revenue or net profit. At one point, Tesla had a P/E close to 1,700 which is perhaps the maximum level for any stock with a market cap above $10 billion.

[Xinarae*]

Tesla has long been a favorable target for investors who seek to benefit from falling stock prices. If successful short sellers can make the difference between selling and buying prices but the recent incident with video game retailer shares such as rising share prices could also be a serious mistake for businesses bitcoin business is also on the rise their net worth has also increased and decreased with the recent bitcoin prices. Tesla revealed last month that its cryptocurrency revenue on its balance sheet was $ 1.5 billion  fortune hit 15 billion just two weeks later he then said on twitter that the price of bitcoin and other cryptocurrencies seemed to be higher.