Tesla books $23M impairment losses in Q2 due to Bitcoin (BTC) price plunge

Tue 27 Jul 2021 ▪ 21h37 ▪ 4 min read — by Greg Hansen

Tesla reported a net profit of $1.14 billion (~£820 million) with $11.96 billion (~£8.61 billion) in second-quarter revenue. The $23 million (~£16.57 million) loss caused by the negative trend of 42,902 BTC on its balance sheet had no significant impact on the company’s financial results. Both the earnings per share of $1.45 and the company’s revenue beat the market’s expectations of $0.98 and $11.3 billion, respectively. Tesla’s share price rose 2 percent after the report, according to CNBC.

Tesla’s bet on BTC

The electric car maker invested $1.5 billion (~£1.08 billion) in Bitcoin in February, which Musk later called “adventurous enough” in one of his tweets.

A month earlier, the company had updated its investment policy to reflect a more flexible approach to diversifying and maximising returns from assets that are not required to maintain operations.

Tesla’s Bitcoin entry in February was somewhere around $34,963. After setting a new all-time-high in April, by the end of the second quarter Bitcoin came down to the same level it was in February.

Tesla reported a $23 million asset impairment charge in the second quarter under “restructuring and other” in the operating expenses category.

At a follow-up conference with analysts, where Elon Musk was accompanied by Tesla’s CFO and Master of Coin Zachary Kirkhorn, the topic of Bitcoin did not arise.

After the digital gold posted its all-time high in April, there has been a trend for Tesla’s shares to lag behind the Nasdaq 100 index. The strongest correlation between Bitcoin and the electric car maker’s shares was seen during the May plunge to $30,000. Once Wall Street surged to new all-time highs, the correlation became less pronounced.

Nasdaq 100 index, Tesla and BTC. Source: TradingView.

As you may recall, at The B Word conference Elon Musk revealed that he personally holds Bitcoin, Ethereum (ETH) and Dogecoin (DOGE). He also confirmed that his space venture SpaceX had invested in Bitcoin.

Tesla started accepting Bitcoin for vehicle purchases at the end of March and sold $272 million worth of its crypto at the end of April.

Musk wants miners to go greener

On 13th May, the company suspended sales of electric cars for BTC due to concerns over the environmental impact of mining, but at The B Word conference Musk confirmed that this option will “most likely” return once the company conducts due diligence on the amount of renewable energy used in mining.

The bright performance of Tesla reflected in its quarterly report was tarnished by BTC’s devaluation. A sizeable price drop in the second quarter could not pass without consequences for the company, which had previously invested $1.5 billion (~£1.08 billion) in the first cryptocurrency. While a $23 million (~£16.57 million) digital asset impairment charge may not seem dramatic, it is debatable if there is any compelling reason for Tesla to hold Bitcoin on its balance sheet today.

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Greg Hansen avatar
Greg Hansen

Trader de métier depuis 4 ans, j'aime l'analyse technique et les chiffres. Le virage crypto était donc une évidence.


The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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