Whitney Tilson’s email to investors discussing Doug Kass’s comments on the new that Tesla purchased $1.5 billion in bitcoin.
Here’s Doug Kass’s take on this morning’s news (Tesla Buys $1.5 Billion in Bitcoin - The Wall Street Journal):
Tesla Purchases $1.5 Billion In Bitcoin: Sorry, This Makes No Sense, Dan
"While many on the Street have discussed the prospects of this move for Tesla, this morning's news formalizes the strategy of Musk and Tesla diving into the deep end of the pool of bitcoin and crypto. From a stock perspective, as we have seen with Microstrategy (and Saylor), this move could put more momentum into shares of Tesla as more investors start to value the company's bitcoin/crypto exposure as part of the overall valuation. Ultimately, investors and other industry watchers will be watching this closely to see if other corporations follow the lead of Tesla on this crypto path or on the other hand does it remain a contained few names that make this strategic jump around bitcoin." - Dan Ives, Wedbush
As subscriber Thomas C noted (below), Wedbush's Ives thinks the $1.5 billion bitcoin purchase by Tesla (TSLA) can put more momentum into Tesla's shares and will allow investors to start valuing Tesla as a cryptocurrency play.
I just don't understand this rationale. Frankly, it’s nonsense and not analysis. It has no basis on the numbers.
Let me explain.
Tesla has a market cap close to $900 billion.
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Tesla has "invested" only $1.5 billion into bitcoin. This represents one half of Tesla's net cash (gross cash of $19 billion less liabilities against the cash of $16 billion).
If bitcoin triples, Tesla will have made about $3 billion in bitcoin - that represents a de minimum portion of Tesla's overall market capitalization. It's noise - it's a rounding error.
Moreover, the size of Tesla's bitcoin investment/exposure and the historic volatility of the price of bitcoin could serve to muck up and produce large swings in Tesla's quarterly results even before backing out the impact of another "non-auto" factor (of regulatory credits). But perhaps that is Musk's strategy - to obscure operating and auto based results, and lack of profitability.
I am shorting more Tesla on the market's outsized reaction today -- $20 billion increase of market cap on an investment of $1.5 billion in bitcoin.
More nonsense in a nonsensical market driven by liquidity and euphoria.
Position: Short TSLA