Former Goldman investment chief advises Tesla

Former Goldman investment chief advises Tesla to sell Bitcoin

Gary Black thinks a Tesla share buyback makes more sense than being invested in Bitcoin.

Gary Black, a former head of equity investments at major investment bank Goldman Sachs, has sparked a heated discussion on Twitter by advising innovative carmaker Tesla to sell its Bitcoin assets to start a share buyback.

Tesla (TSLA) shares have fallen 28% since 8 February, from US$863.42 to US$621.44, after the company announced it had made a massive US$1.5bn bitcoin investment.

The stock of software producer MicroStrategy, which is also massively invested in Bitcoin, is currently weakening One Bitcoin a Day even more. While a record high of 1,315 US dollars was still on the tableau on 9 February, MSTR has since lost 50% again. Nevertheless, MicroStrategy has recently made two further investments.

Whether Tesla’s current phase of weakness can be directly attributed to Bitcoin is questionable, however, because the carmaker had to fight on other fronts during the period in question. For example, the Chinese government slapped the US company on the wrist in February, following an increase in complaints from Chinese car buyers. In addition, the stock market as a whole has been down sharply recently, as seen in the key US stock index, the S&P 500, which has lost 4.1% in the last 30 days.

Former Goldman CIO Gary Black, who can look back on decades of experience in the stock market, nevertheless openly questions whether Tesla’s Bitcoin investment made sense and should not rather be reversed.

The crypto community rejects this reading; rather, one Twitter user, for example, thinks that the loss of the company’s own can be explained by the fact that it has not yet invested heavily enough in Bitcoin (see below).

Tesla stock is now down 28% since buying #Bitcoin as investors signal to @ElonMusk that $1.5 billion was not enough.
– Documenting Bitcoin (@DocumentingBTC) March 4, 2021

Crypto Twitter also rejects the proposed share buyback, with user Techgnostik writing, „I don’t want them to buy back shares. I want them to focus on growth and generate another billion through their bitcoin assets.“

However, Black counters this by saying that TSLA would make itself more attractive to fund managers again by buying back shares, as this would have more added value for investors than buying Bitcoin.

Some Twitter users share this view, while still others consider the discussion about share buybacks or bitcoin to be beside the point. For example, the objection is raised that the innovative company would have set itself the goal of „driving the world’s shift to sustainable energy“.

Short-term strategic considerations to satisfy shareholders would therefore be misplaced (see below)

@Tesla’s mission is to „accelerate the world’s transition to sustainable energy.“ It is not about catering to the mercurial whims of short-term traders in $TSLA.https://t.co/93hr25iJ27 https://t.co/eJReXuvPo4
– AMuchBetterFace (@AMuchBetterFace) March 4, 2021

In conclusion, it is impossible to say exactly whether and how Bitcoin has affected the value of Tesla’s stock. Although MicroStrategy’s share price has fallen recently, the software maker’s stock is still up 340% since 11 August 2020. On that date, the company had disclosed its first bitcoin investment of 21,454 BTC. The subsequent increase in value from 146.63 US dollars to 645.66 US dollars is very likely related to the fact that the bitcoin price has also gained 310 % in the same period.