Tesla announced that it bought $1.5 billion in Bitcoin in an SEC filing after its CEO Elon Musk’s repeated promotion of the cryptocurrency.
The filing is a significant move for both Tesla and the cryptocurrency as Tesla purchased the bitcoin to begin accepting the cryptocurrency as a form of payment for the popular electric cars the company produces.
“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… 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,” read Tesla’s filing with the SEC\
The move will help the company “diversify and maximize returns on [its] cash that is not required to maintain adequate operating liquidity.”
The investment also represents a significant portion of the company’s cash. According to the company’s most recent filing, it had more than $19 billion in cash and cash equivalents at the end of 2020. According to The Wall Street Journal, the purchase of bitcoin is among the largest made by a public company.
Cryptocurrencies are a risky investment for any company to make due to the high volatility of the asset. Tesla acknowledged the risk associated with the investment in their SEC filing.
“The prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties…Moreover, their lack of a physical form, their reliance on technology for their creation, existence, and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence. Finally, the extent to which securities laws or other regulations apply or may apply in the future to such assets is unclear and may change in the future. If we hold digital assets and their values decrease relative to our purchase prices, our financial condition may be harmed,” said the company.
Musk has been pushing cryptocurrencies recently and is credited with increasing the prices of currencies such as bitcoin and dogecoin by tweeting about them. Roughly two weeks ago, Musk added #bitcoin to his Twitter bio just before the price of the currency to jump 20%.
Musk’s behavior has raised red flags in the past with the SEC and even led to charges filed against him. In 201,8, the SEC charged Musk with fraud when he tweeted about taking the company private at $420 per share. He ultimately settled with the SEC and was forced to give up his role as chairman of the company’s board and pay a $20 million personal fine and another $20 million on behalf of the company.