Automobile maker Tesla, under CEO Elon Musk, has made a huge corporate bet on bitcoin, buying $US1.5 billion worth of the once infamous cryptocurrency.
The move was revealed in its most recent 10k SEC filing.
Almost seven years to the day after the world’s biggest bitcoin exchange, Mt Gox, which handled 70 per cent of the world’s bitcoin transactions, was suspended (and eventually shuttered) due to fraud, Tesla has given the cryptocurrency the corporate imprimatur of respectability.
Tesla’s move drove the value of bitcoins to an all-time high of $US44,801.87. Tesla’s own shares were up over a point, suggesting the market was unconcerned by the move.
The company will also enable customers to purchase its cars using bitcoin.
In its filing, Tesla noted the potential risks of the move: “We hold and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss.”
According to the filing, “In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximise returns on our cash that is not required to maintain adequate operating liquidity. As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future. 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.”
The filing acknowledged that 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. “For example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable. Moreover, their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralisation 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.”
Tesla’s move is a huge vote of confidence, but it’s underpinned by a recognition of the uncertainty and risks.
“Finally, as intangible assets without centralised issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets.
“While we intend to take all reasonable measures to secure any digital assets, if such threats are realised or the measures or controls we create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed.”
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