REUTERS: Shares of Tesla Inc fell 2per cent on Wednesday, faring worse than the broader market, as China’s crackdown on cryptocurrencies weighed on the electric car maker, which announced huge investment in bitcoins earlier this year.
Tesla disclosed in early February it had bought around US$1.5 billion in bitcoins. As of March 31, it estimated the carrying value of its bitcoin investment at US$1.33 billion and the fair market value at US$2.48 billion.
Bitcoin has fallen roughly 30per cent since March 31, including a 6per cent slump on Wednesday, after China banned financial and payment institutions from providing cryptocurrency services.
“The rapid drop shows what a risky move it was for the carmaker to buy into the digital asset,” said David Kimberley, analyst at investing app Freetrade.
“It’s easy to ignore or cheer things like this on when it’s going in your favor but Tesla shareholders are now probably wondering what the point of the bitcoin purchase was and whether or not it will hurt their bottom line.”
Tesla had briefly allowed customers to pay for cars using the cryptocurrency, before withdrawing that option, citing environmental concerns that hit Bitcoin prices.
“Tesla is flipflopping on bitcoin from one quarter to the next, which isn’t a bullish sign for bitcoin or for Tesla,” Taylor Ogan, chief executive of Snow Bull Capital, said.
Tesla’s shares last traded at US$564.05 after falling in the session to US$546.98, its lowest since March 5. Trading volume for the stock was already at 0.9 times the 10-day moving average.
The stock is down about 20per cent so far this year, compared with a roughly 8per cent gain for the S&P 500, which was last down 0.5per cent on Wednesday.
Tesla’s stock had gained 743per cent in 2020 compared with the S&P’s 16per cent advance for the year.
(Reporting by Sinéad Carew and Hyunjoo Jin; Editing by Richard Chang)
