Tesla Inc. dumps 75% of its cryptocurrency

(Bloomberg Law) – Tesla Inc. made waves this week when it announced that it had dumped the bulk of its Bitcoin stash.

Selling 75% of its cryptocurrency gave the company a one-time cash infusion, Elon Musk’s electric car company said, but the battered value of its remaining Bitcoin also dinged profits.

“Tesla’s disclosure is really vague and not transparent,” said Vivian Fang, accounting professor at the University of Minnesota …

https://www.msn.com/en-us/money/companies/tesla-s-bitcoin-du…

“Tesla’s disclosure is really vague and not transparent,” said Vivian Fang, accounting professor at the University of Minnesota …

I found it perfectly clear and transparent but

The Captain
is not a professor, just a businessman who had to meet payrolls and supplier’s bills

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Did Tesla gain or lose money from Bitcoin? If it made most of its purchases early enough, then it made money. If it made most of its purchases later on, then it lost money.

Did Tesla gain or lose money from Bitcoin? If it made most of its purchases early enough, then it made money. If it made most of its purchases later on, then it lost money.

Tesla lost a lot of money on Bitcoin. Exceedingly stupid move by Musk to get caught up in the speculation.

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Did Tesla gain or lose money from Bitcoin? If it made most of its purchases early enough, then it made money. If it made most of its purchases later on, then it lost money.

I believe Tesla actually made money but by the quirky accounting rules they also had to book some loses when Bitcoin dropped.

The Captain

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I believe Tesla actually made money but by the quirky accounting rules they also had to book some loses when Bitcoin dropped.

According to recent changes in GAAP, you have to report security gains or losses based on market price, regardless if you actually realized a gain or loss. I disagree with this, but that’s the rule.

Musk’s purchased Bitcoin at about $36,000 and sold at about $29,000. Estimates are that Musk booked about a $440 million real loss on his insanely idiotic Bitcoin speculation. This is an absurd waste of shareholder’s money.

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According to recent changes in GAAP, you have to report security gains or losses based on market price, regardless if you actually realized a gain or loss. I disagree with this, but that’s the rule.

No. Bitcoin is treated as an intangible asset. Different rules. From Tesla’s recent 10-Qs:
We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our bitcoin and we may use third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheet at cost, net of any impairment losses incurred since acquisition.

In any case, it looks like Tesla is currently slightly down on its Bitcoin.

  • Bought 2021Q1 $1.5B
  • Sold 10% 2021 March (cost basis $150M): $128M profit
    [so remaining 90% effectively cost $1500M - $150M - $128M = $1222M]
  • Sold 75% 2022Q2 $936M
    [so remaining 25% of 90% (22.5%) effectively cost $1222M - $936M = $286M]

Since they showed a carrying value of their remaining digital assets at the end of 2022Q2 of $218M, at that point they were down a whopping $286M - $218M = $68M. Snce Bitcoin went a bit below $18K in Q2, and is now at about $22.7K that means that their remaining Bitcoin could be sold for $275M, which puts them down all of $11M.

Given that Tesla has over $18B cash on their balance sheet and next to no debt, the whole bitcoin thing is irrelevant. As Musk said on the earnings call: “cryptocurrency is a sideshow to the sideshow”.

-IGU-

References:

Apr 27, 2021 10-Q
https://www.sec.gov/Archives/edgar/data/1318605/000095017021…
During the three months ended March 31, 2021, we purchased an aggregate of $1.50 billion in digital assets, comprised solely of bitcoin.

Jul 27, 2021 10-Q
https://www.sec.gov/Archives/edgar/data/1318605/000095017021…
We also realized gains of $128 million in March 2021.

July 20, 2022 earnings report (10-Q not yet filed)
https://tesla-cdn.thron.com/static/EIUQEC_2022_Q2_Quarterly_…
As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency. Conversions in Q2 added $936M of cash to our balance sheet.

As of the end of June they show $218M as the carrying value of their remaining digital assets.

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Since they showed a carrying value of their remaining digital assets at the end of 2022Q2 of $218M, at that point they were down a whopping $286M - $218M = $68M. Snce Bitcoin went a bit below $18K in Q2, and is now at about $22.7K that means that their remaining Bitcoin could be sold for $275M, which puts them down all of $11M.

However you figure it, even losing $11 million of shareholder value speculating on Bitcoin is epic stupidity.

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However you figure it, even losing $11 million of shareholder value speculating on Bitcoin is epic stupidity.

Still small potatoes to the $44 Billion hit if the Delaware Court enforces the original Twitter purchase agreement.

Twitter current market cap $30 Billion.

intercst

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Estimates are that Musk booked about a $440 million real loss on his insanely idiotic Bitcoin speculation. This is an absurd waste of shareholder’s money.

Thanks for the clarification. I agree that bitcoin is “an absurd waste of shareholder’s money.” Maybe a shareholder proposal to stop Tesla’s cryptoSpeculation?

Selling the bitcoin was a good idea, better cash than crap.

The Captain
at least gold is a noble metal, there is nothing noble about crypto currencies

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However you figure it, even losing $11 million of shareholder value speculating on Bitcoin is epic stupidity.

Thing is Musk did not have to lose any money.

You know buy low sell high.

Odds are the two major cryptos rally from here all over again.

He could have simply held into better times.

He is not getting that right which amazes me.

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However you figure it, even losing $11 million of shareholder value speculating on Bitcoin is epic stupidity.

As a shareholder, I agree with Musk that it’s irrelevant. Personally, I’d prefer that Tesla doesn’t engage in financial engineering and rather sticks to its mission. But I recognize that having to do business with operations in many countries and dealing with all the foreign exchange issues is … complicated. Up to this point, Tesla has not done any foreign exchange hedging. But I don’t see that having some cash in cryptocurrency is any different.

And as you’ve already demonstrated that you don’t understand the accounting methods, I don’t see where you’re justified in claiming “epic stupidity”. You don’t even seem to know what problem this was an attempt at solving. Your rationale seems to come down to “Bitcoin bad”.

So, if BTC goes up 10% or so to $25K, and Tesla is therefore up $16M instead of down, will that suddenly mean that it becomes epic cleverness? Me, I think it’s just noise either way.

-IGU-

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Thing is Musk did not have to lose any money.

Tesla, not Musk. Seems weird that people can’t even get straight what they’re complaining about.

Musk himself did have some Bitcoin, according to him. It would be surprising if he’d sold any of it. And it can’t be more than a tiny amount, since pretty much all of Musk’s vast paper wealth is in his ownership portion of Tesla and SpaceX.

He is not getting that right which amazes me.

Being amazed by misinformation and one’s own ignorance is hardly surprising.

There are vast fortunes that have been made and lost speculating in cryptocurrency. Neither Tesla nor Musk have either made or lost much. Compare the numbers to what inflation has done to the $18B in cash Tesla has on the books – that’s worth about 10% less than a year or so ago, so a $1.8B loss! And “better times” won’t bring that value back.

This entire thread is confused faux shock based on a little misunderstanding and a lot of nothing. We went from syke6’s “Estimates are that Musk booked about a $440 million real loss on his insanely idiotic Bitcoin speculation. This is an absurd waste of shareholder’s money.” to “However you figure it, even losing $11 million of shareholder value speculating on Bitcoin is epic stupidity.” So one made up number is “insanely idiotic” and one only 2.5% the size is “epic stupidity”. Not to mention that this is Tesla, not Musk.

-IGU-

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Thing is Musk did not have to lose any money.

Tesla, not Musk. Seems weird that people can’t even get straight what they’re complaining about.

It is very weird indeed because it was Musk’s decision to lose the money. Reading with comprehension is needed.

Lets edify something for those who are long Tesla.

Tesla TTM EBITDA is $12 billion. The PE is 110. MCap $846 billion. Note EBITDA is not used to find the PE.

GM TTM EBITDA is $24 billion. The PE is just under 6. MCap $50.5 billion.

It really is a matter of comprehending when to get out. Tesla after this current downturn will bounce back and do well. But the heights for the market cap will never again be achieved. All of the major car manufacturers and about 600 new EV manufacturers are out to eat your lunch. Tesla’s leadership edge wont save the totally insane market cap.

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Being amazed by misinformation and one’s own ignorance is hardly surprising.

There are vast fortunes that have been made and lost speculating in cryptocurrency. Neither Tesla nor Musk have either made or lost much. Compare the numbers to what inflation has done to the $18B in cash Tesla has on the books – that’s worth about 10% less than a year or so ago, so a $1.8B loss! And “better times” won’t bring that value back.

This entire thread is confused faux shock based on a little misunderstanding and a lot of nothing. We went from syke6’s “Estimates are that Musk booked about a $440 million real loss on his insanely idiotic Bitcoin speculation. This is an absurd waste of shareholder’s money.” to “However you figure it, even losing $11 million of shareholder value speculating on Bitcoin is epic stupidity.” So one made up number is “insanely idiotic” and one only 2.5% the size is “epic stupidity”. Not to mention that this is Tesla, not Musk.

-IGU-

You are the only one in denial wishing upon a star. I saw that earlier today and let it go. But you are hard on people dealing with reality.

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OK guys, time to ratchet down the acrimony a notch or two. Or three.

Let’s be honest, the whole stock market is based on disagreement with someone. When I think it’s a great time to buy a stock, I need a fool who thinks it’s a great time to sell. When I think it’s a great time to sell a stock, I need a fool who thinks it’s great time to buy. Did you notice how I’m always smart and they’re always fools? Funny how that works out.

By the way, while we shouldn’t call each other names (like fool), I think it’s ok to call Musk a fool for two reasons; 1) he is a public figure, and 2) he is a fool. OK, I forgot the HTML tags, so just relax.

Most of the time I just buy stocks I like and hold them for a long time. I avoid the disagreements AND have time to smoke Cuban cigars and drink beer in my backyard. I like cigars and beer! (Hey, I think I have a future as a Supreme Court Justice. - Wendy, before you hit the FA button, remember it’s not a political joke, it’s judicial joke.)

Not agreeing is not necessarily bad. As General Patton said, if everyone is thinking alike, then somebody isn’t thinking. In a few months (if I’m lucky) I’ll be celebrating my 45th wedding anniversary with the love of my life, and WE don’t agree on everything.

So guys, before you go to bed tonight, I want you to kiss and make up. Wait, that’s what my wife and I do. Never mind.

Guys, let’s agree to disagree nicely.

Don’t make me get snarky, you’ll regret it. :slight_smile:

AW

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Not to mention that this is Tesla, not Musk.

When it comes to Tesla and Musk the Lovers and the Haters are having a shoot-out at the OK Corral!

Don’t sweat it! LOL

The Captain

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AW,

I agree.

I did mention I let it go earlier. I was not going to argue with someone else’s investment in Tesla.

But for a poster to make so many rude blunt insults against some of the folks here talking in honest terms about the BTC investment Musk “ordered”…or “made”… is denial.

I am not going to argue that anyone should sell anything. I will state the valuation is way over done. If he wants to argue otherwise I will go back to letting it go. Far be it for me to stop him or ask him in any regard to change his course. It is uninteresting to try.

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It is very weird indeed because it was Musk’s decision to lose the money. Reading with comprehension is needed.

You, of course, have no idea how the decisions inside Tesla are actually made. Neither do I.

Perhaps there’s a reason that Zach Kirkhorn’s title is “Master of Coin” and perhaps it’s just an inside joke.

In any case, Musk is not Tesla and Tesla is not Musk. You conflating the two does not change things.

Lets edify something for those who are long Tesla…

I will happily put all my investment in Tesla, and if you put yours in GM the market will no doubt reward us appropriately.

Tesla TTM EBITDA is $12 billion. The PE is 110. MCap $846 billion. Note EBITDA is not used to find the PE.

I won’t try checking all your numbers, but Tesla’s PE is actually under 100. It’s not hard to verify from the quarterly report I posted earlier. GAAP EPS for the past year is: $1.44 + 2.05 + 2.86 + 1.95 = $8.30. Stock price is $816.73. So the PE is 816.73 / 8.30 = 98.4. Of course P/E ratio is fairly useless for a company growing as fast as Tesla is (see https://public.flourish.studio/visualisation/4045651/), but since you obviously don’t care whether your numbers are right, there’s little point in discussing whether they are useful.

If making up numbers with no actual source or basis in fact, and flinging baseless accusations is how you make investment decisions, I can see why you think GM is a better bet than Tesla. Best of luck.

-IGU-

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Stock price is $816.73. So the PE is 816.73 / 8.30 = 98.4.

I will apologize for misreading the PE as 110. The PE 98 is the same ballpark.

Unlike people who fault others for mistakes, I make a practice of admitting when I am wrong.

I never said GM is a good investment. Or that I would invest in GM.

None of what you are saying is how I would invest in a corporation.

Good luck, I actually do not want to see anyone’s wallet here hurt. That is my first motive. My second motive is not be insulted in a disagreement when the person hurling the insult is very in the wrong.

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