Yesterday saw crypto investors brace for momentum as Tesla (NASDAQ:TSLA) CEO Elon Musk touted the utility of Dogecoin (CCC:DOGE-USD) over Bitcoin (CCC:BTC-USD) as a means of making purchases. While this didn’t do much to send Dogecoin prices up, news this morning has done exactly that. Musk tweeted that Tesla would start accepting the popular meme coin as a form of payment for company merch. That’s good news for DOGE, but it’s also good news for Tesla stock.
The tweet may be vague, but that doesn’t seem to matter to investors. Many were quick to respond favorably to the news. Dogecoin prices soared as much as 25% following the announcement.
What’s Happening With Tesla Stock
The effect of Musk’s announcement on Dogecoin prices was almost instantaneous. While he did not specify which merchandise would be part of this new initiative, he didn’t have to. Although it has cooled off slightly, DOGE is still up 20%. The same can’t be said for Tesla stock, though, which has fallen by 2% so far this morning.
Tesla is having a difficult week so far, with stock prices falling almost 6% throughout the past five days. It’s important to note, though, that this trend isn’t due to Musk’s Dogecoin announcement. There are other factors at play, likely the most important of which is the fact that Musk recently sold $906.5 million worth of Tesla stock, continuing his pattern of offloading shares this season.
Tesla will make some merch buyable with Doge & see how it goes
— Elon Musk (@elonmusk) December 14, 2021
While he recently exercised his option to buy 2.134 million shares, they were purchased at the individual strike price of $6.24, a right guaranteed to him by way of a compensation package agreement set in place in 2012. That’s not a bad deal for him when we consider that they are currently worth over $952 apiece.
What It Means
There’s no question that Musk’s decision to accept Dogecoin as a means of payment will help the meme coin gain legitimacy and credibility. Despite its unprecedented rise in May 2021, the coin has often been dismissed by industry insiders, even as Bitcoin has risen to prominence. To understand what it will mean for Tesla stock, though, we must first take a look at at the company’s merch market.
When we think of Tesla’s products, we tend to think of its innovative electric vehicles that changed the face of American automotive manufacturing. It’s also worth noting, though, that the company’s website features an extensive merchandise section. Consumers can purchase almost any type of clothing item from bomber jackets to baseball caps, all featuring the company’s iconic logo. It doesn’t stop there, though. Tesla’s Lifestyle section includes $60 umbrellas and $150 Texas belt buckles. For $45, anyone can plug their smartphone or tablet into a desktop “Supercharger,” modeled after Tesla’s EV charging stations.
Tesla stock and vehicles may make the headlines, but the company’s merchandise is a market all its own.
Why It Matters
Even in 2013, Business Insider reported that Tesla was selling a surprising amount of merchandise, and it’s a safe assumption that Tesla’s merch sales have only increased as the company has continued to inspire many EV enthusiasts. While selling clothing and merchandise is not how Tesla makes its money, every t-shirt and hoodie sold by the company helps to boost its brand.
Accepting Dogecoin will only help Tesla further cement its status as an innovative and forward-thinking company, exactly the type that consumers like to root for. Tesla stock is currently experiencing some turbulence, but ultimately, this decision will help buoy share prices in the months ahead.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.