Tesla’s stock fell 7% following its announcement that it invested $1.5 billion of its cash reserves in the premier cryptocurrency Bitcoin.
Since the announcement of Tesla on Monday, Tesla shares have fallen about 7% and are now trading at $811.66. market capitalization has fallen from $834.6 billion to $77.9 billion.
Reasons Why Tesla Stock Fell
The reason for the fall in stock prices may be other than Bitcoin purchases, but Baker Avenue Wealth Management team strategist King Lip and others don’t need to turn 8% of Tesla’s reserves into volatile assets. It is pointed out that it is a risk.
“Exposure to Bitcoin adds volatility to Tesla shares, which Bitcoin outperforms Tesla.”
Tesla stocks tend not to follow the views of financial analysts. Financial media Barron‘s points out that less than 40% of analysts rated Tesla shares as “buying.”
Gary Black, a former Bitcoin analyst and bitcoin skeptic, said two weeks ago that he would sell Tesla shares if he added Bitcoin to his balance sheet. In fact, as declared, he revealed an exit from Tesla shares on Twitter but said he intends to come back again.
2/ I bought $TSLA in August 2019 because the EV runway was huge, TSLA was expanding its TAM through new markets (MIC, MIG) and product segments (CUV, CyTruck, <$30K segment, semi, etc). On present value of 2025 or 2030 earnings, $TSLA still looks very attractive.— Gary Black (@garyblack00) February 8, 2021
Mr Black then revised Tesla’s stock forecast to $960, down $40 from the previous estimate of $1,000.
Elon Musk’s younger brother and Tesla director Kimbal Musk sold 5% of his shares for $25.6 million. Another director, Antonio Gracias, also sold more than 150,000 shares the day after the announcement of Bitcoin, according to an application to the authorities.
Despite this timing, there is no clear evidence that these sales are related to recent Bitcoin purchases. Furthermore, it is unclear how the purchase of Bitcoin affected the stock price. News also surfaced this week to discuss the quality issue of Tesla’s electric vehicles with the Chinese government.
Bitcoin Not to Blame
Not all stocks are at a disadvantage to Bitcoin. Social media giant Twitter’s share price has risen following comments that it may buy Bitcoin. In an interview with CNBC on February 10, Twitter Chief Financial Officer Ned Segal said Twitter was considering buying Bitcoin and using it to pay employees.
"We've done a lot of the upfront thinking to consider how we might pay employees should they ask to be paid in #bitcoin, how we might pay a vendor if they asked to be paid in #btc and whether we need to have #btc on our balance sheet," says @NedSegal $TWTR. pic.twitter.com/KjIgnqDmYC— Squawk Box (@SquawkCNBC) February 10, 2021
Two days after the interview, Twitter’s share price rose about 15% from $ 59.88 to $68.56.
Similarly, stock prices have risen 4% after the masquerade announced this week that it will support cryptocurrency settlement in 2021.
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