Tesla’s second-quarter earnings results published on Wednesday July 20 yield few surprises for stakeholders, with bottlenecks in China hitting production output and operating margins taking a (slightly less than) expected 4.6% hit.
But one revelation came as somewhat of a shock to the cryptocurrency market: Elon Musk’s electric vehicle giant has engaged in a mass disposal of its Bitcoin holdings over the last quarter, adding US$936mln in converted cash to the balance sheet.
“The reason we sold a bunch of our Bitcoin holdings,” Musk told shareholders, “was that we were uncertain as to when the Covid lockdowns in China would alleviate, so it was important for us to maximise our cash position given the uncertainty”.
Tesla was far off being the largest corporate Bitcoin holder — that award goes to uber-maximalist Michael Saylor’s MicroStrategy Incorporated — but in a speculative market, such news can have an overweight effect on price action.
Bitcoin responded with a 3.35% drop to below US$23,000 in what has otherwise been a bullish week for the world’s largest cryptocurrency.
Musk and Bitcoin: A love/hate relationship
Tesla first announced a US$1.5bln Bitcoin purchase in a January 2021 Securities Exchange Commission (SEC) filing.
“Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future,” the filing stated.
That did not last long, after Tesla scrapped the option after two months due to Musks’s concerns about the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions”.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
One crypto that Musk has not fallen out of favour with is Dogecoin (DOGE); he stated that no DOGE has as yet been sold, though how much DOGE is in Tesla’s coffers is unclear.
Tesla still has US$218mln worth of “digital assets” on the books, but the majority of that is likely the remaining 25% of Bitcoin.
Nor has Musk completely turned his back on Bitcoin.
“We are certainly open to increasing our holdings in the future, so this should not be taken as some verdict on Bitcoin, it’s just that we were concerned about overall liquidity of the company,” Musk said.
Tesla’s quarter-end cash and cash equivalents totalled US$18,324bln, offset by US$1.73bln in capital expenditure.
