Although there has been growing speculation that Tesla, the electric car company run by the world’s richest man, Elon Musk, sold 75% of its Bitcoin holdings as at the second quarter of 2022, at loss, new reports suggest otherwise.
According to an official Form 10-Q filing with the United States Securities and Exchange Commission (SEC), after selling 75% of its BTC stash for dollars in the second quarter, the company netted a realized gain of $64 million.
The report also revealed that the EVM also recorded a $170 million of impairment losses “resulting from changes to the carrying value” of its Bitcoin holdings. In finance, an impairment loss occurs when the fair value of an asset held by a company falls below the carrying value of the investment.
What you should know
- The filing elaborated on information and statements provided in Tesla’s quarterly earnings release and call on Wednesday. On the earnings call, Tesla Chief Financial Officer, Zach Kirkhorn, said that Tesla, “converted a majority of our bitcoin holdings to fiat for a realized gain, offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the [Profit and Loss Statement] included within restructuring and other.”
- The information now concludes that Tesla’s impairment charge and its profit on disposal all occurred in the second quarter of the year because the company did not add to or reduce any of its Bitcoin holdings in the first quarter, nor did it record an impairment charge then.
- Tesla first acquired $1.5 billion worth of bitcoin in the first quarter of 2021 but did not disclose its average purchase price. Later in that first quarter the company trimmed its bitcoin position by 10%, a sale that boosted that quarter’s earnings by $272 million.
- Tesla recorded per-share earnings of $2.27 in the second quarter on revenues of $16.93 billion. Although profitability was down QoQ, it was however up YoY. The company stated that its profitability was impacted by rising inflation and growing competition for battery cells.
- The 10-K disclosure did not reveal any new insights about Tesla’s digital asset strategy. However, the company explained that it may increase or decrease its holdings over time.
- It reads, “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 on our view of market and environmental conditions.”
The electric vehicle maker still has 10,800 BTC on its books, according to Bitcoin Treasuries. At a current price of around $22,000 BTC, Tesla’s digital asset holdings are worth roughly $237 million.