Tesla sold a large amount of Bitcoin from its reserves, retaining just 25% of the BTC it bought last year. However, the company has made it clear in official statements that the move was made purely to boost its liquidity during a difficult economic period.
The sale took place in the second quarter of the year
Last Tuesday Tesla released its earnings report for the second quarter of 2022, which revealed that the company has converted most of its Bitcoin holdings into dollars, earning about $936 million in cash for its balance sheet.
The BTC sold made up 75% of the company’s Bitcoin holdings, as it had purchased $1.5 billion worth of Bitcoin in February 2021.
However, it had sold approximately $272 million of those holdings in the first quarter of 2021. After the latest sale, the company holds about $218 million of Bitcoin.
Sales due to liquidity
Tesla CEO Elon Musk addressed the issue during an earnings call with analysts.
As he explained, the sale had nothing to do with the value or prospect of Bitcoin, but this need came up due to the company’s concerns about its liquidity due to the shutdown of its factory in China due to Covid-19.
Specifically, for two months the Shanghai plant remained shut down due to the country’s sanitation protocol in an attempt to contain Covid-19.
In addition, spare parts shortages and transport disruptions also caused further delays in production and deliveries. As a result, Tesla’s operations fell short of the company’s targets.
However, Musk made it clear that the company is open to increasing its Bitcoin holdings in the future.
Tesla’s CFO explains the sale
Tesla’s CFO, Zachary Kirkhorn, has revealed that the sale of Bitcoin brought a profit to the company, meaning it sold at a higher price than it had bought them for.
However, he also pointed out that the remaining Bitcoin in the company’s holdings was worth far less than its purchase price, indicating that the drop in cryptocurrency prices was significant enough to offset the gain from the second quarter 2022 sale.
According to Kirkhorn, the actual net result was a $106 million cost on the company’s balance sheet.
The issue with Bitcoin payments
In early 2021 Tesla had announced that it would accept Bitcoin for Tesla car purchases, however Musk later noted that the company suspended this payment option due to the, allegedly, energy-intensive BTC mining process. However, the CEO clarified that Tesla will review the possibility of reinstating the Bitcoin payment option.
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