One day after posting blowout second-quarter earnings, electric carmaker Tesla revealed in a public filing Tuesday that the value of its bitcoin holdings plummeted more than $1 billion last quarter from $2.5 billion at the end of March as the nascent crypto market reeled from a roughly 40% crash, wiping out virtually all the gains Tesla made on its initial $1.5 billion investment but resulting in only modest losses so far.
In a Tuesday filing, Tesla revealed that its stake in cryptocurrencies was worth nearly $1.5 billion, down about $1 billion from $2.5 billion on March 31.
The company disclosed no cryptocurrency sales in the second quarter, confirming comments Musk made in May after speculation that Tesla sold more bitcoin led prices to plunge 20% over four days.
The firm also reported a $23 million impairment loss, which is subtracted from overall profits in the quarter, as a result of its bitcoin holdings, reflecting the change in bitcoin’s value from the time of Tesla‘s initial investment.
The carmaker hasn’t disclosed an exact bitcoin purchase date or or how much it was bought for—only that it happened in the first quarter before February 8, when bitcoin prices ranged from about $30,000 to $38,000.
Bitcoin prices, currently at roughly $38,455, have moved up about 9% since the end of last quarter, meaning Tesla’s holdings are likely worth approximately $1.6 billion Tuesday, assuming the firm hasn’t bought or sold any bitcoin in the third quarter.
Shares of Tesla ticked up 1.5% in premarket hours following an after-close earnings report that shattered Wall Street expectations and disclosed Tesla’s eighth-straight quarterly profit—a record $1.1 billion, up tenfold from $104 million a year ago.
Accounting rules require corporations to treat bitcoin as an intangible asset, meaning they must write down the value if the price declines, but can’t write up the value if the price appreciates, Jerry Klein, the managing partner of $9 billion advisory Treasury Partners, told Forbes by email. “Corporate investors get none of the sweets, but all of the indigestion by investing in bitcoin,” he says.
Bitcoin staged a massive rally during the pandemic amid rising inflationary concerns and heightened institutional adoption. Prices nearly doubled in February after Tesla revealed it had invested $1.5 billion in bitcoin and would begin accepting it as payment. Just two months later, however, the car company revealed it sold about 10% of its bitcoin stash, netting more than $100 million from the transaction. And in May, the carmaker reversed course on crypto, with Musk announcing it would no longer accept bitcoin as payment until at least half of its mining is done using renewable energy. Prices crashed more than 50% from an April record high above $63,000, and they’ve struggled to recover ever since in light of an intensifying ban on cryptocurrency mining in several Chinese provinces. As of Tuesday, prices are still down nearly 40% from peak levels.
What To Watch For
Business analytics firm MicroStrategy, which owns more bitcoin than any other corporation in the world, reports earnings Thursday. Last month, the company said it expects to incur a loss of at least $284.5 million in the second quarter as a result of its bitcoin holdings. At the time, it held about 92,079 bitcoins on its balance sheet, worth about $3.6 billion on Tuesday but at one point worth more than $5 billion.
Despite at one point crashing more than 50% this year, the price of bitcoin is still up nearly 250% over the past year.
Tesla’s Bitcoin Holdings In Reverse (Forbes)