The announcement stunned the entire crypto ecosystem. On Wednesday, during the presentation of his quarterly results, Elon Musk returned to the reasons that led his company to part with its assets.
Thunderbolt in the crypto ecosystem. On Wednesday, Telsa, owned by billionaire Elon Musk, announced that it had sold 75% of its bitcoins during the second quarter of 2022, worth around $936 million, reducing its current holdings to $218 million. dollars.
The company had approximately 42,902 bitcoins in its treasury since January 2021, compared to 10,725 bitcoins today. According to the Bitcointreasuries site, which lists the companies or states that hold bitcoin in their treasury, Telsa has gone from second place in the ranking after the giant Microstrategy, to 4th place, being overtaken by Galaxy Digital and Voyager Digital.
“The uncertainty of Covid restrictions”
The company admitted that the depreciation of bitcoin (which has lost more than 70% of its value since its peak last November at $69,000, editor’s note) had hurt its profitability in the second quarter. During a conference call on its quarterly results, Elon Musk explained this decision.
“The reason we sold some of our bitcoin holdings was because we didn’t know when the Covid lockdowns in China were going to ease. So it was important for us to maximize our cash position, given the current situation. uncertainty of the restrictions linked to the Covid in China”, specified Elon Musk.
The move had a moderate impact on bitcoin’s price, which has fallen about 3% since Wednesday, trading at just over $22,900 at the time of writing.
Elon Musk, however, explained that he remains open to an increase in his bitcoin holdings in the future. “This should not be seen as any verdict on bitcoin […] And we haven’t sold any of our dogecoin,” he said. As a reminder, since January, his company has been accepting payments in this cryptocurrency for certain services.
On social networks, this announcement has been the subject of many reactions, in particular from one of its competitors, Michael Saylor, the boss of the company Microstrategy which has 130,000 bitcoins in its treasury.
At this stage, Elon Musk did not speak on the social network.
A decision that goes against its long-term strategy?
In a gloomy macro-economic context, with a cryptocurrency market in full bear marketall companies that have invested part of their cash in bitcoin have faced record losses.
In mid-June, during the second crypto-crash, Telsa and Microstrategy lost nearly $1.5 billion due to the fall in bitcoin, respectively more than $900 million for Microstrategy and more than $500 million. dollars for Tesla. Its losses were to be assessed in its next financial results. Was this bitcoin sale made to make up for his losses? The question may arise.
Telsa’s decision is indeed against the current of Tesla’s long-term strategy vis-à-vis bitcoins. Indeed, according to its last quarterly report dating from April, Elon Musk’s company had revealed that it had neither bought nor sold the bitcoins held since the beginning of 2021.
Thus, the value of his bitcoin holdings was the same since September and was worth $1.26 billion. That doesn’t mean there haven’t been any moves in its cash flow since Tesla made a $1.5 billion bitcoin investment in early 2021, though.
Indeed, in detail, the car manufacturer’s latest quarterly report specifies that Tesla only bought crypto-assets (“digital assets”) during the first quarter of 2021 (for 1.5 billion dollars therefore) and nothing since. On the other hand, there is mention of $272 million in sales of crypto-assets in the first quarter of 2021. Since then, no sales of these assets have taken place.
“During the fiscal year ended December 31, 2021, we purchased and received $1.50 billion worth of bitcoins. […] We recorded impairments of $101 million on these digital assets. We also realized gains of $128 million from the sale of a portion of our holdings in March 2021,” Tesla admitted in a financial filing.
The company had pointed out that while the “book” value of its digital assets was $1.26 billion at the end of December, its “fair” market value was $1.99 billion.
All companies that have invested part of their cash in bitcoin, like MicroStrategy, face the volatility of this cryptocurrency. Digital assets are considered “intangible assets with an indefinite life under applicable accounting rules,” Tesla said.
“Therefore, any decrease in their fair value below their carrying value at any time after their acquisition will require us to record impairment charges, whereas we cannot make any upward revisions for any increase in the market price. until a sale,” says Tesla.