The biggest revelation in Tesla’s annual report, filed Monday with the Securities and Exchange Commission, might be the company’s new philosophy on cash management.
Tesla (ticker: TSLA) invested $1.5 billion in the cryptocurrency Bitcoin. The holding was disclosed as a new risk factor listed in the company’s form 10k, the annual filing made by public companies with securities regulators.
“We hold and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss,” reads the report. It goes on to add: “In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity …we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future.”
Tesla also expects to accept Bitcoin as a means of payment in the near future.
The implications are far reaching, given that Tesla is the most valuable car company in the world. Bitcoin was up about 11% on the news in early trading Monday, although some people may dismiss the investment as an eccentric move by Tesla CEO Elon Musk.
Tesla stock was up 2.1%. Investors, for now, appear to like the innovative nature of the company’s new approach to cash management and payments.
Wedbush analyst Dan Ives believes the news might be good for Tesla stock.
“This move could put more momentum into shares of Tesla as more investors start to value the company’s bitcoin/crypto exposure as part of the overall valuation,” wrote the analyst in a report reacting to the revelation. “Ultimately, investors and other industry watchers will be watching this closely to see if other corporations follow the lead of Tesla on this crypto path or on the other hand does it remain a contained few names that make this strategic jump around bitcoin.”
He rates Tesla stock Hold and has a target of $950 for the stock price.
Typically, when a 10k report comes out, investors look for updates about warranty expenses, perhaps, or accounting-policy changes—details not covered in earnings reports. Risk-factor changes aren’t typically where investors go first.
But Tesla has proven to be a unique entity. And CEO Elon Musk has tweeted about cryptocurrencies several times recently. Musk is putting his money, and Tesla’s money, where his mouth is.
Write to Al Root at email@example.com