Wedbush believes the news formalizes the strategy of Tesla diving into the deep end of the pool of bitcoin and crypto
Tesla (TSLA) said in a Securities and Exchange Commission filing Monday that it bought $1.5B worth of bitcoin and that it plans to begin accepting it as a form of payment for its products in the near future. This comes amid a couple of positive messages about digital currencies by Elon Musk on Twitter. Commenting on the announcement, the analyst believes Tesla's move could put more momentum into shares as more investors start to value the company's bitcoin/crypto exposure as part of the overall valuation.
BITCOIN INVESTMENT: In a regulatory filing, Tesla stated that, "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. As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, 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. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt."
Meanwhile, Tesla CEO Elon Musk has been credited for increasing some cryptocurrencies' prices, including bitcoin and dogecoin, by tweeting positive messages about the digital currencies.
MORE MOMENTUM INTO SHARES: Commenting on Tesla's bitcoin investment, Wedbush analyst Daniel Ives called it a "major move" that will have a "ripple effect across corporations around the global. The news formalizes the strategy of Musk and Tesla diving into the deep end of the pool of bitcoin and crypto, Ives added. From a stock perspective, the analyst believes 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. Ives has a Neutral rating and a $950 price target on the shares, with $1,250 bull case.
WHAT'S NOTABLE: Officials from China's State Administration for Market Regulation, as well as those from the Ministry of Industry and Information Technology, Ministry of Emergency Management, Cyberspace Administration and Ministry of Transportation, met "recently" with Tesla in response to reports from consumers about battery fires, unexpected acceleration and over-the-air software update failure, Reuters' Yilei Sun and Brenda Goh reported. The regulators urged Tesla to operate according to China's laws and protect customer rights, according to the publication.
PRICE ACTION: In late morning trading, shares of Tesla have gained almost 2% to $866.10.