Many people took it to Twitter to respond to a Goldman Sachs former equities CIO who suggested that Tesla dump its Bitcoin for company shares. Even though many people are reacting strongly to the suggestion, there seems to be a reason for it.
Tesla invested a whopping $1.5 billion in acquiring Bitcoin in February. Following the disclosure of the investment, TSLA shares started a downward climb from $863.43, which was at that time, to a 28% fall to $621.44.
Another company’s shares, MicroStrategy, experienced the same downhill plunge after investing $15 million in Bitcoin on the 3rd of March. The company shares that were at $1,315 on February 9th went down by 50%.
Reasons behind Tesla Share Plunge Post Investing in Bitcoin
Many factors may be behind the fall in the value of Tesla’s shares. The company had a falling out with the Chinese government due to the low quality of services.
This was as a result of the complaints which the consumers made to the Government. Moreover, there has been a fluctuation in the stock market as the S&P 500 recorded a 4.1% decrease within one month.
However, Gary Black’s tweets have led many people to argue about Tesla’s investment in BTC. The debate now is whether such acquisitions were in the interest of Tesla’s investors.
According to a tweeter user Techgnostik, the company shouldn’t be buying stocks but continue to invest in growth. Based on his suggestion, the company should not dump its BTC for company stocks.
However, Black countered him by saying that Tesla should go for additional fund managers with a stock buyback plan instead of using excess cash to buy BTC.
While some Twitter users support Gary Black’s suggestions, others opine that such arguments shouldn’t even matter since Tesla only used 8% of its cash reserves.
So, for now, there’s no way to know if the BTC investment had a hand in the share price fall. Although the other company MicroStrategy lost half of its share value after the investment, it’s still recording a 340% increase of its shares initially at $146.63. So, even though it’s now at $645.66, from $1,315, the company shares are still on the high sides.