Tesla’s Bitcoin investment could cause an explosive situation for the electric car manufacturer. Because the fall in the market for digital currencies could be reflected in Tesla’s balance sheet.
• Bitcoin significantly lower in price
• BTC probably below book value from the first quarter balance sheet
• Massive consequences for Tesla’s second quarter balance sheet to be expected
When Tesla surprisingly invested in Bitcoin in the first quarter of 2021 , the crypto market was in a celebratory mood. The electric car maker even wanted to enable Tesla buyers to pay for their vehicles with the oldest cryptocurrency, which gave the digital coin an additional boost. The fact that Tesla sold part of its Bitcoin holdings , which contributed to the fact that the carmaker was able to write black numbers for the seventh quarter in a row, was meanwhile less well received by crypto investors. And the negative news didn’t stop: just a little later, Tesla stopped Bitcoin payments due to “environmental concerns” back on. The news caused a state of emergency on the crypto market – Bitcoin has collapsed massively since May, and the weakness of BTC also tore other crypto currencies into the abyss.
Is Tesla going to be concrete?
One Bitcoin is currently trading around the $ 34,000 mark. In the meantime, however, the price had dropped to below $ 29,000. This will likely force Tesla to take a step that the electric car manufacturer has wanted to avoid so far: The company will have to report how many Bitcoins are actually in Tesla’s possession and at what price the digital coins were purchased.
On the basis of the first quarter figures, “Forbes” has already determined the approximate purchase price that Tesla probably put on the table for a BTC in the first quarter of the year. The calculation is based on $ 2.48 billion – that is how much Tesla’s BTC stake was worth, according to the balance sheet published on March 31, 2021. At the time, the Bitcoin price was around $ 59,000. Tesla itself originally invested $ 1.33 billion in bitcoins. According to the US magazine, the Musk group is said to have paid an average of 32,000 US dollars per coin. After the partial sale in the first quarter, Tesla should now own 42,100 Bitcoins, the sheet calculates.
Bitcoin investment is arguably causing a loss on Tesla’s balance sheet
Since the Bitcoin price fell in the second quarter below the book value that Tesla had on the balance sheet in the first quarter – according to “Fortune” 31,600 US dollars – Tesla will probably have to show its colors with regard to its investments. Because bitcoins are treated as so-called “collectibles” by the supervisory authorities. If the value of a collectible rises, this is not recorded on the balance sheet; the profits are only posted when it is sold. If the price falls below the book value, however, Tesla will have to show this as a loss on the balance sheet due to “impairment costs”. The car manufacturer will then use the lowest price in the reporting quarter for accounting. This distinguishes BTC investments from investments in stocks, the current market value of which is listed in the balance sheet, regardless of
Conversely, this means: Even if the Bitcoin price recovers towards the end of the month, this will not appear as a profit in the balance sheet, instead a loss will be shown, even if the book price was only once below the book price in the previous quarter.
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Bitcoin sales speculation
In order to prevent Tesla’s crypto investment from leaving such traces on the balance sheet, the electric car maker could take a path that it took in the first quarter and liquidate part of its Bitcoin holdings. Since profits are recognised when selling, the investment in the crypto currency could still have a positive impact on the balance sheet at the end of the quarter.