Less than a month after US automaker Tesla announced its $ 1.5 billion holdings in Bitcoin, one of the company’s most vocal bullish investors announced that it had sold 1.8 million of its shares to customers .
Ron Baron, the founder of Baron Capital, an investment management firm in New York, said his firm had sold TSLA shares for their clients because they believed they were taking over an excessive percentage of some of their portfolios. Even so, the billionaire made it clear he hadn’t sold any of his 1.25 million Tesla shares and reiterated his long-term bullish outlook for the Fortune 500 company.
“It was painful to sell every single stock,” he added.
Bitcoin the main culprit?
The sale took place over the past six months. This reflected Baron Capital’s systematic plans to secure profits for their customers as Tesla stock boomed 338 percent to $ 653.20 apiece. Still, the company didn’t disclose the number of shares it had sold after Tesla announced it had shifted 8 to 10 percent of its cash reserves to Bitcoin on Feb. 8.
Baron Capital reportedly held just over 6.1 million Tesla shares as of February 28. The company bought them at an average price of $ 42.3 per share.
Tesla stock is down nearly 25 percent after investing $ 1.5 billion in Bitcoin. Source: Nasdaq: TSLA on TradingView.com
Tesla stock began correcting after hitting its record high of $ 900.40 on Jan. 25. According to its filing with the US Securities and Exchange Commission, the company began allocating Bitcoin that same month to further diversify the returns on its cash and maximize reserves.
Tesla did not disclose the price at which bitcoins were bought. However, a report by CNBC found that the company’s profit from its unique investment strategy was north of $ 1 billion on Feb.21.
Entering unsafe waters
Many traditional economists and strategists have criticized Elon Musk’s decision to expose Tesla to an asset notorious for its price volatility. This included Nouriel Roubini, an economist who correctly predicted the 2008 financial crisis and advised other companies to avoid copying Tesla’s Bitcoin purchase.
Tesla shares fell around 25 percent after investing in cryptocurrency. However, it is still unclear whether the correction in the stock has occurred due to its overvaluation – like any other technology stock – or whether Tesla fears it would lose its money if it exposed itself heavily to the volatile Bitcoin market.
Bitcoin rose more than 25 percent after Tesla’s investment. Source: BTCUSD on TradingView.com
Baron, who showed his initial dislike of Tesla’s crypto investment, said Elon Musk could do anything he thought he could with his money on Thursday. For him, investing in growth stocks is the best way to beat inflation.
“You have to protect yourself from inflation. We invest in these great companies that can grow quickly, ”he said.
