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Is Tesla's Bitcoin Investment a Good Move?

By Matthew Frankel, CFP® - Feb 16, 2021 at 7:08AM

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Is holding a ten-figure sum of Bitcoin on its balance sheet a smart move for the automaker?

We recently learned that Tesla (TSLA 7.33%) decided to purchase about $1.5 billion of Bitcoin (BTC 0.26%) to hold on its balance sheet. But is this really the best use of the company's capital? In this Fool Live video clip, recorded on Feb. 8, contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss whether it's a smart and responsible move by Elon Musk and Tesla's leadership team, and whether another major tech giant could get in on the cryptocurrency trend. 

Jason Moser: Musketeer Java also asks, "read today some analysts suggesting that Apple (AAPL 4.08%) could start its own crypto exchange. That would be a game changer. I don't feel strongly about crypto, and I know you both have not been interested in getting too excited about it. [laughs] However, now with Tesla jumping in, it seems we can't ignore Bitcoin."

Matt Frankel: I knew it was a matter of time before someone mentioned Tesla and Bitcoin today.

Moser: Yeah, I mean, you're right. I'm not interested.[laughs] It's great that they have it, I just don't really care.

Frankel: Regardless of our opinions, I want to make two points here real quick, if I may. Apple hasn't shown much interest in crypto, period.

Moser: Yeah.

Frankel: In the past five or six years since it's really become mainstream knowledge, I don't think they've really shown that much interest. No. 2, I don't know how I feel about Tesla putting $1.5 billion of its assets into Bitcoin. Regardless of what you think about Bitcoin and here's my point; if you're a CEO of a company, like Elon Musk is, you have a fiduciary duty to your shareholders, right?

Moser: Yeah.

Frankel: I don't know how you can make the fiduciary argument that putting $1.5 billion of the capital you're supposed to be using to grow the business into a speculative asset, regardless of whether you think Bitcoin is going to be worth $500,000 in a decade. I don't know how you can make the argument that that's a fiduciarily sound decision. That's really my thoughts about that. Regardless of what you think about Bitcoin.

Moser: Yeah, I guess I would view Bitcoin more as a store of value today -- I just don't understand why anybody would spend Bitcoin given the way the price changes so much, like why would you spend it?

Frankel: It's an extra step, why not spend U.S. dollars? If I were going to buy a Tesla, let's say I wanted a Model S that costs $85,000, why would I take that $85,000 which I probably had to borrow from a bank, take that in cash, convert it to Bitcoin, then use that Bitcoin to buy a Tesla? That's going to appeal to people who already have $85,000 in Bitcoin, which is a very small subset of the population. To borrow the words from Jason, I don't care enough to do that.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$759.63 (7.33%) $51.90
Apple Inc. Stock Quote
Apple Inc.
$149.64 (4.08%) $5.86
Bitcoin Stock Quote
$28,918.58 (0.26%) $75.01

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