Tesla jettisons 75% of Bitcoin holdings, boosting cash balance by $936m
- Reference: 1658412008
- News link: https://www.theregister.co.uk/2022/07/21/tesla_ditches_75pc_of_bitcoin/
- Source link:
Along with its latest financial performance, the company announced plans to sell off a significant holding of the blockchain-backed tokens in exchange for fiat currency – money backed by national banks and sovereign wealth.
"As of the end of Q2, we have converted approximately 75 percent of our Bitcoin purchases into fiat currency," Tesla's Q2 earning statement said. The transaction boosted the company's cash balance by $936 million.
[1]
In February last year, the car company founded by CEO Elon Musk said it had [2]acquired $1.5 billion in Bitcoin to bring "more flexibility to further diversify and maximize returns on our cash." It also said it would allow customers to pay for their vehicles with the cryptocurrency.
[3]
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Since then, the price of Bitcoin has ridden a roller coaster, with an emphasis on steep descents. It peaked in November 2021 at a price of around $49,000 but since the beginning of 2022 has dropped dramatically with value falling below $20,000 in June, a bar it has struggled to overcome since.
Tesla didn't say exactly why it sold its Bitcoin holdings, but estimates suggest it could take a [5]$460 million hit on the exchange.
[6]
The move by Tesla inspired a Bitcoin sell-off, with the [7]currency falling for the first time in three sessions , presumably making its remaining holdings worth less.
[8]Twitter claims Elon Musk bailed from sale with 'invalid and wrongful' reasons
[9]Not enough desks and parking spots, wobbly Wi-Fi: Welcome back to the office, Tesla staff
[10]Totaled Tesla goes up in flames three weeks after crash
[11]Tesla lawsuit alleges unlawful layoffs at Nevada gigafactory
On an earnings call, Musk said the sell-off was not a comment on Bitcoin per se but a more tactical maneuver around the unpredictability of China's COVID lockdowns and the need to maximize its cash position.
"[T]he reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate. So it was important for us to maximize our cash position, given the uncertainty of the COVID lockdowns in China. We are certainly open to increasing our Bitcoin holdings in future, so this should not be taken as some verdict on Bitcoin. It's just that we were concerned about overall liquidity for the company, given COVID shutdowns in China."
Musk has long held a penchant for cryptocurrencies, personally making investments in and [12]promoting Dogecoin , the meme-inspired currency supposedly created as a joke eight years ago. Who exactly is the butt of the joke remains unclear.
Other tech CEOs with a Bitcoin passion include [13]Michael Saylor of MicroStrategy , the enterprise analytics software company.
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Saylor has been pumping the company's cash into Bitcoin for the last couple of years, as [15]reported by The Register . It held around $1 billion by the end of 2020. Reports now suggest that MicroStrategy's Bitcoin investment was [16]worth $3.4 billion less at the end of the second quarter than the first. ®
Get our [17]Tech Resources
[1] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Ytl4IK0hv8WeV4gOysVxxQAAABY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[2] https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.html
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Ytl4IK0hv8WeV4gOysVxxQAAABY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Ytl4IK0hv8WeV4gOysVxxQAAABY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.cnbc.com/2022/07/18/teslas-bitcoin-holdings-could-result-in-a-460-million-hit-for-the-car-maker-barclays-says.html
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Ytl4IK0hv8WeV4gOysVxxQAAABY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.bloomberg.com/news/articles/2022-07-20/bitcoin-erases-gains-after-tesla-discloses-second-quarter-sales#xj4y7vzkg
[8] https://www.theregister.com/2022/07/12/twitter_vs_musk/
[9] https://www.theregister.com/2022/06/27/tesla_workers_office/
[10] https://www.theregister.com/2022/06/23/tesla_model_s_explodes_after/
[11] https://www.theregister.com/2022/06/21/tesla_unlawful_layoffs_lawsuit/
[12] https://www.bloomberg.com/news/articles/2022-06-21/musk-says-he-supports-dogecoin-after-people-encouraged-him-to#xj4y7vzkg
[13] https://www.theregister.com/2021/05/18/microstrategy_bitcoin/
[14] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Ytl4IK0hv8WeV4gOysVxxQAAABY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[15] https://www.theregister.com/2021/05/18/microstrategy_bitcoin/
[16] https://www.bloomberg.com/news/articles/2022-07-02/microstrategy-s-bitcoin-holdings-take-a-record-3-4-billion-hit#xj4y7vzkg
[17] https://whitepapers.theregister.com/
Re: Up and down ... and up again.
It's pretty simple..
Tesla didn't say exactly why it sold its Bitcoin holdings, but estimates suggest it could take a $460 million hit on the exchange.
Tesla's previously relied on regulatory credits to massage it's results and cashflow. As more competitors produce their own EVs, they won't need to overpay for Tesla's credits. So Tesla's funnymoney sales were only $344M, down 50% from last quarter. It'll be interesting to drill into that. Theory goes you produce 1(?) credit for every EV produced, and have to buy those for non-EVs. If there are more credits hitting the market, obviously the demand and price falls.. Which I suspect is the reason given production figures, ie Tesla didn't produce 50% fewer EVs, so the price per credit has done a bitcoin and tanked.
Then it got $936M cash from flogging crypto, so $1.3bn in cash or 'revenue'. So it reported $621M, but if you exclude bitcoin and credit sales, that would have been ($679m), or an almost $700m loss
Negative cashflow is rarely good for a mature, high-growth tech stock. Especially as the crypto gain is a one-off, and it's cashcow of regulatory credits is going to continue to decline.
Next, they will hold a massive yard sale with Tesla office furniture for $0.50 a piece. That Twitter purchase money isn't going to make itself.
Twitter fine?
That should take care of a large chunk of the $1bn that Elon will have to pay to back out of the Twitter deal.
It's mere pocket change anyway.
Re: Twitter fine?
$1bn is pocket change? My tightest jeans fall down if I have more than £15 coins in my pocket, I can't imagine the problems poor Elon faces maintaining his dignity, or his love life.
The most beautiful woman I've ever seen said she loved me, and I wanted to marry her, but I suspected she might love me because of my money and influence. I decided to test her, I quit my job and gave up my car, etc. Aye, she dumped me instantly without apology, went back to her fat drab accountant ex.
As a romantic man that was a damn close escape. As a walking appendage to a penis, that was my worst decision. The scientific method is trial and error, Musk has erred and is heading to trial.
Pyramid schemes are supposed to be the other way up...
Unless, of course, you're the one getting scammed...
There, fixed it for you...
"presumably making its remaining holdings worth less."
->
"presumably making its remaining HODLings worth less."
You are welcome.
Good - I hate Musk & crypto
$460 million hit
Just a reminder, Musk is far from the only investor in Tesla, and this loss may have been caused by him, but it's also been incurred by all the other investors too. Whether they're all fanbois who don't really care because they still have blind faith in their guru, or whether they include lots of institutional investors who very much will care is something I don't know, but if it's the latter he may soon be faced with some meetings where the money men tell him to stop clowning about with videos of him smoking weed, pissing about with Twitter, etc and concentrate on properly building the company or put someone else in charge who will.
“Who exactly is the butt of the joke remains unclear.”
Up and down ... and up again.
So if this was a business making an investment in bitcoin last year and selling it now, is this a loss? Or does this mean that their tax return this year will show a loss and will reduce their taxation payments for a few years?
Maybe if they sold the bitcoin (making a loss) and Musk has bought it personally at current price levels then he'll see a nice profit in a few years if the price goes back to last years levels. For many years now "maybe" has defined bitcoin.