Tesla, the electric vehicle manufacturer, is backtracking on its bullish attitude towards cryptocurrencies. The automaker recently filed its 10-K (comprehensive annual financial report), which showed a $204 million gross impairment loss on its Bitcoin holdings in 2022, along with a gain of $64 million from converting Bitcoin into fiat currency. This resulted in a net loss of $140 million from cryptocurrency trading activities.
No Longer a Long-Term Belief
In previous 10-K filings, Tesla had shown a “long-term belief” in digital assets. The language detailing this belief, however, has disappeared from its most recent filing.
The filing highlights the impact of volatile crypto prices on Tesla’s bottom line. According to the SEC, digital assets are considered indefinite-lived intangible assets under applicable accounting rules. This means that any decrease in their fair value below the company’s carrying value will result in impairment charges. However, there are no upward revisions for any market price increases until a sale.
Tesla’s Investment in Bitcoin
In the first quarter of 2021, Tesla invested $1.5 billion in Bitcoin, temporarily accepting the crypto as a form of payment for some products. However, the company’s founder, Elon Musk, later cited the need for “confirmation of reasonable (~50%) clean energy usage by Bitcoin miners with positive future trend” and sold 75% of its Bitcoin holdings in the second quarter of 2022.
The filing with the SEC shows that Tesla’s investment in Bitcoin resulted in a net loss of $140 million. The automaker’s long-term belief in digital assets as detailed in previous 10-K filings has now disappeared. The filing also highlights the impact of volatile crypto prices on Tesla’s bottom line, as any decrease in their fair value will result in impairment charges.
