Tesla revealed a year ago on February 8th that it had purchased $1.5 billion in bitcoin. The revelation sent the markets into a frenzy, and CEO Elon Musk, whose tweets can cause billion-dollar price fluctuations, became one of crypto’s most powerful personalities.
After a year, it’s worth considering if Tesla’s Bitcoin purchases were beneficial to the company, regardless of its influence on the crypto markets. “Yes,” is the quick reply. Tesla’s 10-K, a detailed annual report that all publicly traded firms are required to file with the Securities and Exchange Commission, was released on Monday.
According to the article, Tesla generated $128 million in profit by selling some of the Bitcoin it purchased early last year, but it also lost $101 million on the position as of December 31. At first glance, this appears to indicate that Tesla’s Bitcoin foray has resulted in a $27 million profit. However, the tale is more complicated than that, because of the peculiar accounting laws that govern crypto assets—in a way that favors Tesla.
All of this obscures the underlying value of a company’s crypto assets, particularly in a year like 2021 when values increased. Fortunately, Tesla states in its 10-K that the fair value of its Bitcoin was approximately $2 billion as of December 31, implying that the company’s Bitcoin position was up roughly $500 million (on top of the $128 million it made by selling some in March).
Here’s a critical paragraph from the report that not only shows the value of Tesla’s Bitcoin holdings, but also suggests the firm is sticking to its new policy of adding non-cash assets (like crypto) to its balance sheet, which was implemented a year ago:
“We continue adapting our investment strategy to meet our liquidity and risk objectives, such as investing in U.S. government and other marketable securities, digital assets and providing product related financing. In the first quarter of 2021, we invested an aggregate $1.50 billion in bitcoin. The fair market value of our bitcoin holdings as of December 31, 2021 was $1.99 billion. We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash.”
That $1.99 billion is based on the value of Bitcoin on December 31, when it was over $46,000, so Tesla’s holdings today would be slightly less given the current $43,000 price—but still much above the original purchase price.
Some Tesla stockholders might prefer Musk to cease dabbling with cryptocurrency and focus on the company’s main business of shipping automobiles. However, from a strictly financial standpoint, the annual report reveals that Tesla’s Bitcoin acquisitions have been a net positive, implying that crypto is likely to be a long-term part of the company’s future.