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Tesla Reports $170M Impairment Loss on its Bitcoin Holdings in 10-Q Filing
Tesla reported an impairment loss of $170M on its BTC holdings.
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Tesla reported a $170 million impairment loss on its Bitcoin (BTC) investment, according to a 10-Q filing published Monday. On the other hand, the automaker generated $64 million in gains “on certain conversions of bitcoin into fiat currency,” it added.
Tesla Hurt by Crypto Downturn
Tesla saw a $170 million impairment loss in the first nine months of 2022, the carmaker said in a 10-Q filing Monday. The blow comes due to a massive sell-off in the broader cryptocurrency market, which obliterated the prices of Bitcoin and other cryptocurrencies. At the same time, the electric carmaker also gained $64 million from “certain conversions of bitcoin into fiat currency.”
“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.”
– Tesla wrote in a 10-Q filing.
Tesla sold $936 million worth of Bitcoin, or 75% of its holdings, in Q2 2022. The world’s largest electric vehicle (EV) maker by a market cap made no changes to its BTC holdings in Q3 2022 when the value of its digital assets stood at $218 million, unchanged from the previous quarter.
“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.”
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Tesla’s $1.5B Investment in Bitcoin Backfires
Tesla’s impairment loss came after the carmaker invested $1.5 billion in Bitcoin in February 2021 to “diversify and maximize returns” on cash. But the blow shouldn’t come as a surprise given how “cold” the crypto winter is in 2022.
The market downturn sent crypto prices to multi-year lows, with Bitcoin and Ethereum losing 50% in value over the past 6 months. The world’s biggest cryptocurrency currently trades at $19,388, down more than 70% from its all-time high just a year ago.
Investors lost their appetite for risky assets as inflation continued leaping toward new highs in the post-pandemic era. The downturn also led to a sharp decline in other crypto-related markets such as non-fungible tokens (NFTs), where sales plummeted almost 70% in Q3 year-over-year.
Do you think Tesla will keep faith in its remaining digital assets holdings despite the impairment loss? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
