Tesla shook up the cryptocurrency world earlier this week, revealing in a filing that it had bought $1.5 billion of bitcoin. That sent the digital asset to a record of more than $48,000, and spurred questions about which companies could follow suit.
What is referred to as “cash” on a company’s balance sheet is a mix of actual cash in the bank and short-term Treasury bills or other liquid securities — assets that can be readily sold to convert to cash. Cryptocurrencies don’t fit that profile, in part because their value fluctuates so wildly. But with so much cash on corporate balance sheets, companies might see Tesla’s example as an opportunity to get more creative. The total held on non-financial, transportation or utility companies’ balance sheets was a record $1.9 trillion at the end of the third quarter, according to S&P Dow Jones Indices.
“Looking at S&P 500 stocks, they’re really at a crossroads where they need to figure out a better solution for cash management,” Michael Sonnenshein, CEO of crypto asset manager Grayscale Investments, told Yahoo Finance Live. “Many of them do see the dilution of the U.S. dollar, and are looking for other areas to generate alpha besides investing in T-bills and other areas where they would normally allocate capital.”
The question is, which company will be next to take the plunge? A handful of corporations, particularly those that are led by chief executives who have touted the fundamental case for bitcoin, beat Elon Musk to the punch with their bitcoin buys, including MicroStrategy, led by Michael Saylor, and Jack Dorsey’s Square.
“I would immediately look to Amazon, Apple — maybe even a Walmart,” said Anthony Pompliano, a partner at Morgan Creek Digital Assets, in an interview with Yahoo Finance Live. “Just companies that naturally have large balance sheets, who have forward-thinking executive teams and also have some sort of technology understanding.”
Big tech certainly has big balance sheets. Apple has the highest reserve of any non-financial S&P 500 company, with $195.6 billion in cash and marketable securities, followed by Alphabet with cash on hand of $136.7 billion, according to Bloomberg data.
One Apple analyst thinks the company should convert its Apple Wallet into a crypto exchange — and add bitcoin to its balance sheet. Mitch Steves of RBC Capital Markets wrote in a note this week that such a move would be less risky than Apple’s reported interest in electric vehicles.
Tesla, in addition to its investment, said it might also at some point accept bitcoin as payment for its cars. Bitcoin has come to be viewed by many as an asset to be held — a store of value — versus a means of transaction, but there are other companies considering whether to give or accept bitcoin as payment.
Twitter’s chief financial officer, for example, told CNBC that the company has weighed how it might pay vendors or employees using bitcoin. CEO Jack Dorsey, on Twitter’s earnings conference call, talked about the potential of a decentralized system — perhaps like the blockchain underlying bitcoin — to allow users more choice over content.
To be sure, bitcoin-buying is not for every, or even most, companies.
“Normally corporations will invest their cash in very safe assets,” said James Angel, a finance professor at the McDonough School of Business at Georgetown University. “Bitcoin is anything but a safe asset in the near term. Most corporate treasurers are going to recoil from speculating in bitcoin as if from a hot flame.”
Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET.
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