Tesla Earnings Show Bitcoin Sell Off


Elon Musk can be credited with almost turning cryptocurrency into a religion. The billionaire entrepreneur and Bitcoin evangelist has over the years praised crypto for its decentralized nature and urged followers to invest in them. But the recent Tesla earnings report shows that his faith might be wavering. The tech magnate is washing his hands off the declining currency. 

On July 20, the electric carmaker published the Tesla Q2 earnings report that revealed that the company had sold nearly 75% of its Bitcoin holdings. 

Tesla sells Bitcoin

Tesla revealed that it had converted 75% of its Bitcoin holdings to fiat currency.

Did Tesla sell its Bitcoin?

The answer is a resounding Yes. And not just a small amount. From a $1.5 billion investment last year, Tesla converted nearly 75% into fiat currency, bringing its holdings down to $218 million. The Tesla earnings report revealed that as of June 30, the firm had only $218 million in digital assets and stated that the sale added $936 million in cash to its balance sheet. A surprising move indeed considering CEO Elon Musk reiterated in March that the automaker will continue to keep close to its heart.

In 2021, the automaker had gone as far as accepting Bitcoin as payment for new vehicles. However, it soon rolled back the offer over concerns arising from energy usage. At the time, Musk asked crypto enthusiasts to find another way to mine coins as the current method uses fossil fuel-generated electricity that is worsening the climate crisis.

In the first quarter of 2021, Tesla had sold 10% of its Bitcoin holdings when the currency’s market value shot up, netting it $101 million in profit. This year, the Bitcoin has fallen to its lowest since December 2020. 

During the Tesla earnings call, Musk addressed the furore over Tesla sells bitcoin. He explained that the decision to sell Bitcoin was taken as the Covid-19 situation in China seems uncertain and the company wanted to maximize its cash position. He added, “This should not be taken as some verdict on Bitcoin” as the company would be open to reinvesting in crypto in the future. He also clarified that no Dogecoin has been sold by the company. 

Tesla Q2 Earnings

Zachary Kirkhorn, Chief Financial Officer at Tesla, justified the move saying the company had to “offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within restructuring and other.”

Meanwhile, as Tesla sells Bitcoin grabbed headlines, the carmaker reported adjusted earnings of $2.27 per share on $16.93 billion in Tesla revenue in Q2 2022. According to Refinitiv, the electric carmaker generated $16.93 billion in revenue against the expected $17.1 billion. Its automotive gross margins declined to 27.9% in comparison to the 32.9% it generated last quarter. Record high inflation and competition for parts of electric vehicles have severely impacted the automaker.

On the Tesla Q2 earnings call, Musk revealed that the Tesla factory in Berlin managed to roll out 1,000 cars per week in the last week of June and the Texas plant to exceed the number in the coming months. When supply chain issues had disrupted production at the Berlin and Texas factories, Musk had called them “gigantic money furnaces.” On the other hand, Covid restrictions have forced the electric carmaker to temporarily hit the brakes on its manufacturing facility in China. It also increased its store and service center locations overall and reported a 19% year-on-year growth.

After adding the Bitcoin earnings, Tesla’s overall cash and cash equivalents hit $847 million during the quarter.  

Musk remains slightly optimistic about inflation and expects it to decline by the end of the year. However, he warned investors from taking his words as the gospel truth.

From “I would like to see Bitcoin succeed” last July to “The reason we sold a bunch of our Bitcoin holdings was that we were uncertain” this July, Musk’s views on Bitcoin have certainly undergone a sea change.

The post Tesla Earnings Show Bitcoin Sell Off appeared first on Industry Leaders Magazine.


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