Bitcoin reaches $ 60,000, which means that Tesla made a lot of money

Text size

Bitcoin traded above $ 60.00 on Saturday. That means that Elon Musk’s bet on cryptocurrency paid off

Tesla

more than a billion dollars.

Bitcoin, which is traded continuously on cryptocurrency exchanges, is up 5% to around $ 59,800 in Saturday morning trading. Bitcoin traded for up to $ 60,409 on Saturday. This leaves the cryptocurrency up about 107% in the year and 1,000% in the previous year.

Tesla (ticker: TSLA) disclosed a $ 1.5 billion investment in Bitcoin in its annual report filed in February with the Securities and Exchange Commission. It is difficult to know exactly how much Tesla paid for Bitcoin, but prices at that time were around $ 33,000.

At $ 60,000, Tesla has about $ 1.2 billion in its trade. It is almost a new plant that could produce hundreds of thousands of Tesla vehicles a year.

Tesla spent about $ 1.3 billion on capital assets in 2019, the year it was building its facilities in Shanghai. This is only an approximation of the cost of the new plant. Tesla spends money on other assets. Different factories in different geographies cost different amounts and do different things. Furthermore, capital expenditures vary from year to year. Still, it demonstrates how much Tesla has done in its crypto-bet.

Companies always invest excess cash in short-term insurance bonds, such as Treasury bills. Bitcoin is a currency-like asset, but it is very volatile, unlike the options that most corporate treasury departments would use to manage their cash balances. Bitcoin can be more risky than a treasury bill, but, so far, it is difficult to challenge the results.

Tesla’s market value is still low since the investment in Bitcoin was announced. The shares fell about 20%, from about $ 863 to $ 694. This eliminates about $ 161 billion from the company’s market value.

Concerns about cash management that are riskier than average, however, have little to do with the decline. Interest rates are a major factor. The yield on the 10-year U.S. Treasury bill has gone from less than 1.2% to about 1.6% since the Bitcoin investment was released. This 0.4% increase hindered growth actions.

THE

Nasdaq Composite,

home to many highly valued growth companies, it fell by almost 5% in the same period. THE

Dow Jones Industrial Average,

for comparison, it is more than 4%.

Higher rates affect growth stocks more than other stocks for some reasons. High-growth companies often need money to grow and financing for growth is more expensive in a higher-rate environment. High-growth companies also generate most of their cash flow in the distant future. Future cash flow is a little less valuable, relatively speaking, when investors can earn higher returns on their investment dollars today.

Write to Al Root at [email protected]