Tesla recently revealed in a filing with the US Securities and Exchange Commission that they experienced a loss of over $140 million due to their investment in Bitcoin. Despite taking a $204 million impairment charge, the electric car manufacturer was able to gain $64 million from converting their Bitcoin holdings into fiat currency.
“In the year ended December 31, 2022, we recorded $204 million of impairment losses resulting from changes to the carrying value of our Bitcoin and gains of $64 million on certain conversions of bitcoin into fiat currency by us,” Tesla said in the filing.
An impairment charge refers to the decrease in the worth of an asset. This can happen for various reasons, such as economic shifts, like the crypto market downturn after Terra Luna’s collapse in May 2022.
Recently, the SEC received Tesla’s annual disclosure, and just a few days before that, the company released its quarterly earnings report. Despite not engaging in any Bitcoin transactions, the value of Tesla’s Bitcoin holdings decreased, resulting in a loss of $43 million in the last quarter of 2022.
Tesla made headlines in early 2021 when they announced a massive $1.5 billion investment into the popular cryptocurrency, Bitcoin. The company quickly became one of the largest corporate holders of the asset, second only to MicroStrategy.
At the time of Tesla’s investment, each Bitcoin was worth approximately $46,364. However, the cryptocurrency market saw a significant surge in late 2021, and Bitcoin hit an all-time high of $69,044 per coin on November 10th.
Unfortunately, the positive trend did not continue, and the cryptocurrency market faced a sharp decline in 2022. As of January 31, 2023, Bitcoin has dropped to a current trading value of $23,051, showing the volatility and unpredictable nature of the market.
Tesla has seen a significant increase in their impairment losses since 2021. In a filing with the SEC that year, Tesla reported a $101 million loss on digital assets and a $128 million gain after selling some of their Bitcoin holdings.
Fast forward to October 2022, and Tesla shared with investors that they still had over $218 million invested in Bitcoin, despite having sold off 75% of their holdings earlier in the year, worth approximately $936 million at the time.
“As with any investment and consistent with how we manage fiat-based cash and cash-equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of market and environmental conditions,” the company said in Monday’s filing.
Tesla recently made a filing where they referred to their Bitcoin holdings as indefinite-lived intangible assets. This means that they are constantly reevaluating the value of these assets to make sure that their worth is still accurate and up-to-date.
If there is a discrepancy, Tesla notes that it may impact any future investments made into Bitcoin.
“For any digital assets held now or in the future, these charges may negatively impact our profitability in the periods in which such impairments occur even if the overall market values of these assets increase,” the company said.
The latest earnings report and SEC filing from the company failed to mention any specific digital assets apart from Bitcoin.
Although, it’s widely speculated that the company holds Dogecoin as it accepts it as a mode of payment, and its CEO Elon Musk has publicly expressed his fondness for the meme-inspired cryptocurrency.
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