FFCON21 Breaking Barriers May 11-13, 2021

Tesla Sold Some Bitcoins

Bloomberg Opinion | Matt Levine | Apr 28, 2021

elon and bitcoin - Tesla Sold Some Bitcoins

Tesla Bitcoin

I wrote back in February:

A funny thing for Elon Musk to do would be:

  1. Tesla Inc. buys some Bitcoin.
    2. Tesla announces that Bitcoin is good now and that it bought some.
    3. The price of Bitcoin goes up, because institutional adoption of Bitcoin is good for its price, but also because, by the Elon Markets Hypothesis, anything that Musk buys goes up.
    4. Tesla sells some Bitcoin, making a profit.
    5. Musk tweets that the price of Bitcoin is too high.
    6. Bitcoin prices go down due to the Elon Markets Hypothesis.
    7. Go to Step 1.

Well, on Monday Tesla announced earnings, and guess what guess what guess what:

Tesla pulled a new lever to juice earnings in the quarter, generating $101 million in income from selling about 10% of its Bitcoin holdings.

Profit from the cryptocurrency and the sale of regulatory credits and tax benefits contributed about 25 cents to Tesla’s adjusted earnings of 93 cents a share, allowing the carmaker to beat Wall Street’s 80-cent average estimate, Dan Levy, an analyst with Credit Suisse, wrote in a note Monday.

See:  Elon Musk says people can now buy a Tesla with bitcoin

That’s wonderful, my sincere congratulations to them. People want to be mad about this? There is a vague sense out there that it is somehow fraud to buy a thing, say you like it, and then sell some of it. For instance Dave Portnoy, who I guess is an investment celebrity now, used the words “pumps” and “dumps” to describe Tesla’s actions on Twitter, prompting Musk to reply that “Tesla sold 10% of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet.” (Tesla’s “Master of Coin,” Chief Financial Officer Zachary Kirkhorn, also talked a lot about liquidity on the earnings call; Tesla decided to put a chunk of its corporate cash into Bitcoin and I guess needed to make sure that its money wasn’t trapped. A reasonable concern! “We've been quite pleased with how much liquidity there is in the Bitcoin market,” said Kirkhorn.)

For myself, I want to be absolutely clear that:

  1. I don’t think there’s anything illegal about Tesla buying Bitcoin, saying that it bought Bitcoin, and then selling Bitcoin when the price goes up. There’s no indication that Tesla, or Musk, were lying about any of this. (Not legal advice!)
  2. I think that's cool and fun, I’m glad they did it, and I hope they’ll do it again.
  3. I think that, if you can reliably do that — if you are Elon Musk and you can make Bitcoin go up by tweeting about it — you almost have an obligation to do it? Perhaps a fiduciary obligation to your shareholders, but at least a sort of aesthetic obligation to comedy. If Bitcoin wants Musk to manipulate it, Musk really ought to manipulate it.

As I wrote in February, when Tesla bought the Bitcoins:

Musk is in the nice position of being able to spend billions of dollars buying assets in liquid anonymous markets, and then make those assets go up just by tweeting about them. If you can do that, you should! If you can buy a thing secretly, announce “I own the thing,” reliably cause the thing’s price to go up a lot, and then — if you want — sell the thing secretly, then that’s a great business right there. Talk about clean energy; that’s a perpetual motion machine.

See:  Elon Musk Had a Private Meeting With Volkswagen’s CEO. It’s a Brilliant Lesson in Emotional Intelligence

Or people have a sense that these earnings are somehow fake, less real than earnings from making and selling cars? The New York Times says that the Bitcoin sales “led to a $101 million accounting boost,” which makes it sound like it’s not an economic boost. But it is! That’s an extra $101 million of real U.S. dollars that came in the door from selling Bitcoin for a profit.

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