Tesla has not sold any Bitcoin ! loss of $23 million on its BTC holdings
Tesla reports record $1B income for Q2 despite $23M impairment loss on BTC
Tesla’s latest earnings report showed that the firm conducted no digital asset purchases or sales in Q2, but reported an impairment loss of $23 million on its BTC holdings.
Electric vehicle and clean energy firm, Tesla, has reported $1.14 billion in net income for the second quarter.
The firm’s July 26 earnings report showed that total revenue grew by 98% year on year (YOY) for Q2, increasing from $6 billion in 2020 to $11.9 billion this year. Tesla attributed the bulk of its growth to a surge in demand for its electric vehicles, stating:
“In the second quarter of 2021, we broke new and notable records. We produced and delivered over 200,000 vehicles, achieved an operating margin of 11.0%, and exceeded $1B of GAAP net income for the first time in our history.”
The firm also generated quarterly profits of $1.02 per share.
The firm stated that total revenue was partially offset by growth in operating expenses and a Bitcoin-related impairment loss of $23 million.
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As Tesla holds its Bitcoin as an “intangible asset,” accounting rules mandate that the firm must report an impairment loss when the asset’s price drops below its cost basis. However, Tesla is not required to report pricappreciations in the underlying asset until the position is realized through a sale.
The report also shows that Tesla didn’t buy or sell any digital assets in Q2. As such, Tesla’s sole crypto purchase remains its $1.5 billion BTC buy in Q1, with the firm having also cashing out $272 million during the same quarter.
Tesla’s $1.14 billion in net income was calculated using Generally Accepted Accounting Principles (GAAP) — a collection of commonly accepted accounting rules used for financial reporting such as expense matching and revenue recognition.
Non-GAAP figures, which exclude irregular or non-cash expenses such as depreciation, one-time balance sheet adjustments, and acquisitions, estimate the firm took in $1.6 billion with a profit of $1.45 per share.
Speaking at the virtual conference “The ₿ Word” on July 22 Tesla’s CEO, Elon Musk quashed rumors that the firm may sell its holdings in the near future, also teasing that it may resume accepting BTC payments for its electric vehicles.
Musk also revealed for the first time that his aerospace firm SpaceX holds BTC, emphasizing that Tesla and SpaceX have no plans to sell:
“We’re not selling any Bitcoin, nor am I selling anything personally or nor is SpaceX selling any Bitcoin.”
Tesla records $23 million in bitcoin-related impairments after cryptocurrency’s second-quarter plunge
- Tesla reported bitcoin-related impairments of $23 million in the second quarter as crypto prices plunged.
- As of the end of March, the automaker said its $1.5 billion investment was worth $2.48 billion, based on the surge inbitcoin in the first quarter.
- Tesla doesn’t account for bitcoin as a mark-to-market asset.
said Monday that a $23 million bitcoin-related impairment caused some drag on its quarterly operating income.
The electric auto company only referred to bitcoin or crypto one time in its second-quarter announcement, after CEO Elon Musk went back and forth on whether Tesla would accept the digital currency for vehicle purchases. The subject didn’t come at all on Tesla’s conference call with investors and analysts.
In February, Tesla announced a $1.5 billion purchase of bitcoin – more than its entire quarterly research and development budget – and said it may continue investing in cryptocurrencies. As of the end of March, the company said its investment was worth $2.48 billion, based on the surge in bitcoin in the first quarter.
Tesla reported a net gain of $101 million from sales of bitcoin during the first quarter, helping to boost its net profits to a record high. On the company’s statement of operations, that gain shows up as a reduction in operating expenses, suggesting that it flipped some of its holdings as bitcoin prices rose that quarter.
But the price of bitcoin plunged more than 40% in the second quarter, so Tesla’s holdings would be worth much less than at the end of the first quarter. The cryptocurrency peaked above $63,000 in April, and then dropped below $30,000 earlier this month. Bitcoin is currently trading just shy of $40,000.
Tesla doesn’t account for bitcoin as a mark-to-market asset, meaning it only recognizes an earnings benefit if it sells to lock in the gains. Therefore, the drop in the value of bitcoin shouldn’t affect earnings as long as Tesla hasn’t divested of any of its holdings.
That’s a different way of reporting investments than companies that back tech start-ups through their venture arms. In those instances, companies typically mark their holdings every quarter based on the market price, determining the value by a follow-on financing round or a public stock price.
Despite the bitcoin expense, Tesla’s operating income quadrupled to $1.3 billion from the same period a year earlier. Revenue of $11.96 billion and earnings per share of $1.45 both topped analysts’ estimates, according to Refinitiv.
Shares of Tesla rose 1.4% in after-hours trading Monday to $666.59. The stock, among the best market performers in recent years, has dropped more than 25% since January.