Plunging bitcoin prices have forced Tesla to record a $170 million diminishing loss alongside solid second-quarter earnings, which saw a 42% jump in profits.
Per Bitcoin Treasuries data, Tesla spent $1.5 billion to attain around 43,200 BTC in the first quarter of 2021. It sold 10% of its bitcoin for $272 million that same quarter.
At the time, CFO Zach Kirkhorn remarked Tesla’s bitcoin investment was long-term and those sales were just an experiment to determine bitcoin’s liquidity and utility as an alternative reserve asset.
But last week, Tesla reported selling 75% of its bitcoin in this year’s second quarter for $936 million.
“As with any investment and consistent with how we manage fiat-based cash and cash-equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of the market and environmental conditions,” the company said in an SEC filing.
Digital assets are assumed to be “indefinite-lived intangible assets” under accounting rules. For that reason, Tesla must value its bitcoin at its lowest point during a quarter and distinguish a loss if it drops below its buying price.
Correspondingly, Tesla can recognize any advantages if it sells its digital assets. The electric-vehicle maker posted a $64 million gain on certain conversions of BTC into fiat currency in the six-month period ending June 30, when the asset’s price was around $19,000.
According to an estimate by Arcane Research analyst Vetle Lunde Tesla sold 29,060 BTC at an average price of $32,209, leaving the company with about 9,700 BTC ($205.1 million) on its balance sheet.
The company’s bitcoin sale throughout the economic market recession shows it was forced to manage risk and raise cash in a rising interest-rate environment, said Marcus Sotiriou, an analyst at GlobalBlock.
In any case, Tesla still claims the second-largest BTC stash of any public company, behind Michael Saylor’s data intelligence firm MicroStrategy, which currently holds 129,698 BTC ($2.74 billion).
Tesla CEO Elon Musk, who has been a vocal cryptocurrency proponent, to some degree held an influential position on the price movement of cryptocurrencies last year via his tweets. Markets were often influenced by his comments and closely observed Tesla’s crypto purchases.
Musk claimed in an earnings call last week that Tesla is open to buying bitcoin in the future. “It’s just that we were concerned about overall liquidity for the company, given Covid shutdowns in China,” he added, noting his company did not sell any of its dogecoins.
Leave a Reply