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In a recent SEC filing, the electric vehicle manufacturing company reported a loss of $140 million dollars on its net Bitcoin holdings.
Impairment Charges Result In BTC Loss
The Elon Musk-led EV innovation company has disclosed to the U.S. Securities and Exchange Commission (SEC) that it had earned a $204 million gross impairment loss on its Bitcoin holdings across 2022. The impairment loss refers to the reduction in the value of Bitcoin as an asset due to the fluctuating economic circumstances brought about by the crypto winter of 2022.
The company further revealed that it had earned $64 million from trading BTC for fiat currencies at different times throughout the year, resulting in a net loss of $140 million from its BTC trading in 2022.
The report says,
“Digital assets are considered indefinite-lived intangible assets under applicable accounting rules. Accordingly, any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognize impairment charges, whereas we may make no upward revisions for any market price increases until a sale. 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.”
Musk, Tesla, And Bitcoin
According to the filings, Tesla reported that its aggregate Bitcoin investments in the first quarter of 2021 amounted to $1.5 billion. During this time, founder Elon Musk announced that the company would accept Bitcoin as payment from its U.S.-based customers. However, the payment mode was halted just months later, with Musk claiming the need for Bitcoin to adopt clean energy usage for any future continuation of the payment policy.
The company had sold off 75% of its BTC holdings in the second quarter of 2022, citing liquidity concerns after the two-month-long shutdown of the Tesla Gigafactory in Shanghai due to Covid-19. The sell-off earned the company $936 million at the point of sale but actually cost the company a net loss of $106 million due to the drop in the value of the crypto.
The company did not sell off any more of its BTCs after that. In its recently released earnings reports for the fourth and last quarter of 2022, it was revealed that Tesla had continued to hold on to its 9720 BTCs for the entire second half of the year.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.