Last February, Tesla bought US$1.5 billion worth of bitcoin for its balance sheet. After selling 10 percent two months later to “test liquidity”, the inimitable car manufacturer has now sold US$926 billion following a poor second quarter.
According to Tesla’s financial statements, “As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency”, adding, “Conversions [bitcoin] in Q2 added $936 million of cash to our balance sheet.”
The quarterly report noted that Tesla’s Bitcoin holdings remained largely stable for three consecutive quarters, however by the end of March, its digital assets were worth just U$1.261 billion. Following the most recent sale, Tesla is now said to have just 25 percent of the bitcoin it originally acquired, valued at around US$218 million.
On the earnings call, Tesla CEO Elon Musk, who recently became embroiled in a legal tussle with Twitter, explained the reason for selling three-quarters of its bitcoin holdings:
The reason we sold a bunch of our Bitcoin holdings was that we were uncertain when the COVID lockdowns in China would alleviate, so it was important for us to maximize our cash position, given the uncertainty of COVID lockdowns in China.Elon Musk, Tesla Inc, CEO
“Neither Here Nor There On Crypto”
Despite the sale, Musk make it clear that the company remain opened to increasing its holdings in the future:
This should not be taken as some verdict on Bitcoin.Elon Musk, Tesla Inc, CEO
He then responded to a subsequent question, where he called crypto “a sideshow to the sideshow” and not the something the business spends any real time on, “We’re neither here nor there on cryptocurrency,” he said.
While some were quick to criticise Musk for having “paper hands”, others said that he could come back anytime knowing that “everyone gets the price they deserve”.
However from a pragmatic perspective, it seems as if Tesla had little choice if they wished to avoid a horrific quarterly result. As one commentator noted, in the absence of the bitcoin sale, Tesla’s cashflow would have been negative:
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