Tesla’s Losses on Bitcoin Mount as Price Dips Below $30,000

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Tesla earned more than expected in the first quarter, partly due to a profit on Bitcoin sales.

Betancur / AFP via Getty Images

Bitcoin’s recent decline has pushed the price above a threshold that would likely force Tesla to see a loss in its holdings if the cryptocurrency doesn’t recover by the end of the month. That would raise more concerns about the EV manufacturer’s earnings quality.

Bitcoin was trading at around $ 29,500 early Tuesday, down 9.5% and about 54% below the 52-week high of nearly $ 65,000 it hit in April.

The decline is a problem for Tesla as accounting authorities view Bitcoin as a collector’s item, so investments in the currency are held at cost. Profits are only recorded when selling Bitcoin, but companies must record losses when the currency falls below its book value. Corporate investors feel losses but not the boost from gains while holding the currency.

Accounting is different from stocks or traditional currencies, which are valued at market value, with both gains and losses reflected in income, even if an interest is not sold.

Tesla is said to have bought Bitcoin for about $ 36,000, the price prevailing when the company announced its investment in February, but the price appears to have been closer to $ 32,000 based on its financial records for the first quarter. Tesla did not immediately respond to a request for comment on its Bitcoin holdings or trading.

The filing states that Tesla’s stake was valued at $ 2.48 billion as of March 31, when the price was close to $ 59,000. That suggests the company held around 42,000 coins. Tesla put the holding value of these coins – the price it paid for them – at 1.33 billion US dollars. for an average cost per coin of $ 31,620.

If Bitcoin was still trading at $ 29,500 in late June, when Tesla closes its second quarter, the company would be sitting on a loss of nearly $ 90 million.

Tesla posted a profit of approximately $ 100 million from the sale of Bitcoin in the first quarter. That helped the company make more than Wall Street analysts expected, but it also created some confusion among investors. Some analysts raised concerns about the quality of Tesla’s profits, arguing that the “blows” of profits should be driven by the underlying business, not one-off items.

It looks like analysts and investors have another one-off issue to grapple with in the company’s second quarter report. This one won’t be positive.

Tesla stock was down slightly in early trading while the

S&P 500

was slightly higher. Bitcoin could be part of the cause.

Since the beginning of the year, Tesla stock has fallen by around 12%, lagging behind comparable earnings from the S&P 500 and

Dow Jones industry average.

The stock is up around 212% over the past year.

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