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A Rant Against Tesla's Bitcoin Purchase And A Reason To Own The Stock Anyway

By Jani ZiedinsStock MarketsFeb 09, 2021 12:46AM ET
www.investing.com/analysis/a-rant-against-teslas-bitcoin-purchase-and-a-reason-to-own-the-stock-anyway-200559414
A Rant Against Tesla's Bitcoin Purchase And A Reason To Own The Stock Anyway
By Jani Ziedins   |  Feb 09, 2021 12:46AM ET
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BTC/USD Daily Chart
BTC/USD Daily Chart

Bitcoin surged 20% and hit $47K after Elon Musk announced Tesla (NASDAQ:TSLA) bought $1.5 billion worth of the cryptocurrency.

While this is great news for Bitcoin owners, it is borderline negligent for TSLA shareholders. TSLA is a car/battery/solar panel company. It is most definitely not a hedge fund. It doesn’t have the mandate from shareholders or the skillset necessary to speculate in cryptocurrencies.

If the highest and best use of TSLA’s cash is to buy cryptocurrency, then it should sell its car division and invest the proceeds into Bitcoin. Or even better, give that money to back shareholders and let them decide the best way to invest it.

But no, Elon is gambling shareholders’ money and chances are good this will end in a giant writedown at some point. And given TSLA’s modest 1.3% gain yesterday, shareholders were not overly enthused about this idea either.

Decisions like this show a lack of fiscal discipline and while Elon has gotten away with big risks in the past, the problem with luck is it always runs out. While this $1.5 billion is largely immaterial to the company’s long-term prospects, it demonstrates a carelessness with shareholder money and no doubt that will come back to haunt the company when Elon’s luck runs out.

But this is a problem for another day. Until then, the Cult of Elon is strong and as much as I disagree with this move on principle, most shareholders put Elon on a pedestal and he can do no wrong. Momentum is higher and there is no reason to think yesterday’s announcement changes the upward trajectory of this stock.

The near-term outlook is for higher prices but never get far from the exits because there is a frightening amount of air underneath us. The question isn’t if this stock falls, but when. If you have a solid plan for protecting your profits, you will be fine.

A Rant Against Tesla's Bitcoin Purchase And A Reason To Own The Stock Anyway
 

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A Rant Against Tesla's Bitcoin Purchase And A Reason To Own The Stock Anyway

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Comments (12)
Jörg Holl
Jörg Holl Feb 10, 2021 9:07AM ET
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Maybe it has been to easy for Elon recently to raise 5 Bl $ by selling some shares at high prices.
Gershom Zvi
Gershom Zvi Feb 10, 2021 8:39AM ET
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As per this article Jani is shorting Tesla
Gershom Zvi
Gershom Zvi Feb 10, 2021 8:37AM ET
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Tesla failed in September 2020 from $500 to $330 and very fast recovered !!!
Gershom Zvi
Gershom Zvi Feb 10, 2021 8:34AM ET
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How about starlink stock IPO ?
dixon pinfold
dixon pinfold Feb 10, 2021 12:18AM ET
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The world is having problems deciding whether to resent and envy Musk or admire him.  I can't envy him, because I find nothing to resent and much to admire.  There are many like me, but others, I can tell, find his achievements humiliating.
HL Carvalho
HL Carvalho Feb 09, 2021 6:28AM ET
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A great amount of people criticise to every musk´s act, but in a near future they goes, "How can he be a genius like that?"
AY Haych
AY Haych Feb 09, 2021 4:06AM ET
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A bubble inside a bubble
andrzej kaczorowski
andrzej kaczorowski Feb 09, 2021 3:26AM ET
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Or maybe again he is someone thinking out of the box?
Ari M Eden
Ari M Eden Feb 09, 2021 3:10AM ET
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I think it’s a smart place for him to put the extra cash right now frankly.
Ari M Eden
Ari M Eden Feb 09, 2021 3:10AM ET
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Holding it in dilutive dollars could well be more dangerous to shareholders.
Invest Right
Invest Right Feb 09, 2021 2:40AM ET
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Well put. It's definitely acting like a hedge fund and the cult of Elon really is very strong.
Nordin Mohamad
Nordin Mohamad Feb 09, 2021 1:11AM ET
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bitcoin is = conman currency...
Gershom Zvi
Gershom Zvi Feb 09, 2021 1:11AM ET
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No doge more comman
Solomon Lalani
Solomon Feb 09, 2021 12:50AM ET
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This is how the cult breaks. $BTCUSD can go up 10k a day and down 20k the next day.  Wouldn't take long when a lot of BTC holders will take profit at this price driving it back under 30k! Elon has made the mistake of being overconfident this time that he is invincible!  That's when you are hit the hardest!
Ben Ben Tan
Ben Ben Tan Feb 09, 2021 12:50AM ET
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he is exploiting the trust that people have for him. even doge coin shot up when he twittered about it. I don't think a CEO should try to manipulate the market with his influence aside from his main business.. he is more of a celebrity to me now.
Charles Barnes
Charles Barnes Feb 09, 2021 12:50AM ET
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Ben Ben Tan but I keep making $ on Tesla. Loving that.
 
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