Tesla, the maker of electric cars, has seen more than $55 billion fly off the market since it announced four days ago it had bought bitcoins for $1.5 billion – but Twitter and MasterCard have followed suit.
Since Tesla’s announcement on Monday, the electric car giant’s share price has fallen 7 percent from $869.52 to $834.6 billion. It is currently trading at $811.66 (market capitalization of $779 billion).
While other factors may be behind the stock’s decline, some investors, such as King Lip, chief strategist at Baker Avenue Wealth Management, are concerned that holding 8% of a company’s cash reserves in a volatile asset is an unnecessary risk, as he explains:
This will increase the volatility of the stock due to the exposure to bitcoin. It’s better for Bitcoin than Tesla.
Tesla stock is known for ignoring the opinions of financial analysts. Barron’s financial magazine says that in 2018, no more than 40% of analysts consider the stock a buy.
Gary Black, a former Bernstein analyst and bitcoin skeptic, said two weeks earlier that he would sell his Tesla shares if the company added bitcoin to its balance sheet. True to his word, he announced his departure on Twitter, but also added that he would be back:
3/ I have made a lot of money in $TSLA over the past 18 months and will be looking for a lower entry point to get back in. I will continue to tweet my opinion on TSLA volumes, earnings and other events. I thank you all for your past and look forward to your continued support.
– Gary Black (@garyblack00) February 8, 2021
After just 90 minutes, he revised his forecast for the automaker’s stock to $960, $40 below his previous estimate of $1,000. So some Twitter users are wondering if he really believes his numbers, considering he just left office.
Elon Musk’s younger brother and Tesla CEO Kimball Musk also participated in the deal by selling 5% of his shares for $25.6 million. Another director, Antonio Gracias, also sold more than 150,000 shares the day after the bitcoin announcement, according to documents filed with stock exchange authorities.
Despite the timing, there is no indication that these sales are related to the latest bitcoin news. Incidentally, it is unclear what impact the bitcoin purchase had on the share price, given the news this week that Tesla has been sued by Chinese government authorities for trading in the quality of electric cars.
It’s also clear that not all stock investors dislike bitcoin. Shares of social media giant Twitter have skyrocketed following reports that the company could soon be buying bitcoin. In an interview on CNBC’s Squawk Box at 10. In February, the tech company’s CFO, Ned Segal, said that the company was considering putting the cryptocurrency on its own books and using it to pay Twitter employees.
We thought a lot in advance about how we might pay employees if they ask to pay in #bitcoin, how we might pay the supplier if they ask to pay in #btc, and whether we should have #btc on our balance sheet, says @NedSegal $TWTR. pic.twitter.com/KjIgnqDmYC
– Squawk Boxing (@SquawkCNBC) 10. February 2021
In the two days following the interview, Twitter shares rose nearly 15 percent from $59.88 to $68.56, just below the all-time high of $69.
Similarly, MasterCard shares rose 4% after the company announced it would support several cryptocurrencies on its network this week.
Large companies investing in bitcoin would not necessarily lead to much higher values: If Apple, Microsoft, Facebook, Twitter, MasterCard and Google invested 8% of their cash reserves in bitcoin, it would only be a total investment of less than $8 billion. This is less than 1% of bitcoin’s current market capitalization. However, the signal this sends should encourage other companies and small investors to jump on board.