Tesla buys $1.5 billion in bitcoin, plans to accept it as payment

KEY POINTS
  • Tesla announced in an SEC filing Monday that it has bought $1.5 billion worth of bitcoin.
  • The company also said it would start accepting bitcoin as a payment method for its products.
  • CEO Elon Musk has been credited for raising the prices of cryptocurrencies, including bitcoin, through his messages on Twitter.

 

Tesla announced Monday (February 8, 2021) it has bought $1.5 billion worth of bitcoin.

In a filing with the Securities and Exchange Commission, the company said it bought the bitcoin for “more flexibility to further diversify and maximize returns on our cash.”

Tesla also said it will start accepting payments in bitcoin in exchange for its products “subject to applicable laws and initially on a limited basis.” That would make Tesla the first major automaker to do so. The $1.5 billion worth of bitcoin will give Tesla liquidity in the cryptocurrency once it starts accepting it for payments.

Tesla disclosed its bitcoin purchase in its latest annual report, saying the move aims to “diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.” Tesla said a board committee had approved changes to company rules on investments, adding that it can also invest cash in gold bullion and gold exchange-traded funds among other asset.

The bitcoin purchase, likely among the largest by a public company, comes after a rally in 2020 when the price more than quadrupled. Tesla is joining a handful of other companies that have disclosed bitcoin holdings. Software developer MicroStrategy Inc. acquired about $425 million worth of bitcoin last summer, and its CEO, Michael Saylor, has become an outspoken proponent.

Tesla’s move into bitcoin represents an investment of a significant percentage of its cash in the investment. The company had more than $19 billion in cash and cash equivalents on hand at the end of 2020, according to its most recent filing.

Two weeks ago, the billionaire Elon Musk added the hashtag #bitcoin to his Twitter bio, a move that helped to briefly push up the price of the cryptocurrency by as much as 20%. Two days later, he said on the social medial chat site Clubhouse: “I do at this point think bitcoin is a good thing, and I am a supporter of bitcoin.”