Tesla sells 75% of its Bitcoin holdings as Covid shutdowns, production issues impact profits

[midian182]

What just happened? Bitcoin's price has fallen over the last few hours following a week of mild resurgence after Tesla revealed it had sold 75% of its BTC holdings. The electric vehicle giant's financial report for the second quarter of the year shows it has been struggling in the wake of its Shanghai factory shutdown and production issues at new plants. It's also been dealing with rising inflation, a shaky economy, and cryptos' falling price.

Tesla revealed it had purchased $1.5 billion worth of Bitcoin in February last year, helping push the digital coin to a then-record high of $44,000. It sold 10% of those holdings that April, and now the company has confirmed the sale of 75% of its remaining Bitcoin, converting the digital currency into $936 million of cash.

Tesla said it still holds digital assets worth $218 million. Elon Musk spoke about the sale in an investor call, noting that the company has not sold any of its Dogecoin and that the selloff "should not be taken as some verdict on Bitcoin." The CEO explained that Tesla selling its Bitcoin was due to concerns "about overall liquidity of the company given COVID shutdowns in China." Musk also talked about the company's newest factories in Berlin and Texas, which he said are losing "billions of dollars right now."

A month after revealing its initial Bitcoin investment last year, Musk said Tesla would soon start accepting the coin as payment for Tesla products. But it was only a few weeks before he backtracked and suspended the perk due to Bitcoin's environmental impact.

Tesla saw record profit levels of $3.3 billion in the first quarter of the year. The company reported a $2.26 billion net profit yesterday, a decline of around 31.5% quarter-on-quarter. Quarterly revenue was also down, from $18.7 billion in Q1 to $16.9 billion in Q2.

More expensive than they used to be

The Q2 2022 figures are still an improvement compared to the same period last year when Tesla made $1.1 billion in profit and $11.9 billion in revenue, a result of more deliveries and a higher average selling price; the company has raised the price of its vehicles this year, including a $6,000-maximum hike last month.

A decline in revenue and profit was expected after Tesla previously confirmed its deliveries fell 18% due to the Covid shutdowns in China and the supply issues. The company has also cut 10% of its jobs over Musk's "super bad feeling" about the economy.

The Bitcoin price rollercoaster

Bitcoin had experienced a slight rebound this week. BTC was hovering close to $19,000 last Tuesday (July 12) but had rallied to almost $24,200 on Wednesday. The value dropped back down to $22,700 Following Tesla's announcement.

Masthead: Ivan Marc

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https://www.techspot.com/news/95377-tesla-sells-75-bitcoin-holdings-covid-shutdowns-production.html

 

[Dimitriid]

While people assume this is just the dump part of the pump & dump for Tesla's coin holdings, this is at the same time anything related to Musk is in trouble as Twitter appears to have a fairly good case against him.

So before you buy a Tesla or subscribe to Starlink you might want to you know, test the waters for a few more months just to make sure they both don't just implode into nothingness.

In the case of Tesla however, it's likely he could easily get some public money bailout but not if he's fought against in court for his behavior so even that is no guarantee.

 

[Uncle Al]

Musk would be smart to hire a business manager to run the existing businesses and stay out of them, just stick to developing new ones. Of course, he isn't as smart as he lets on to be so it won't happen.

 

[terzaerian]

Power Wheels and paper hands

 

[Plutoisaplanet]

So before you buy a Tesla or subscribe to Starlink you might want to you know, test the waters for a few more months just to make sure they both don't just implode into nothingness.

In the case of Tesla however, it's likely he could easily get some public money bailout but not if he's fought against in court for his behavior so even that is no guarantee.

Considering Tesla has $18B of cash available to them and quarterly operating expenses a 10th of that, Tesla could stop making and selling all products and survive 2 and a half years still paying R&D, sales, general, and administrative employees. This year and last year Tesla was able to use their massive operating income to entirely cover $10B of capital expenditures, pay down $6.7B of debt (with under $3B remaining) and still have leftover free cash flow.

There are a lot of reasons to not buy a Tesla, but the business' health is not one of them. You can not like Elon Musk, the design of the cars, or that they're too expensive. But you can't deny that Tesla is lucrative, the opposite of being prone to imploding into nothing.

 

[wiyosaya]

Translation Musk wakes up to the real world.

 

[wiyosaya]

Musk would be smart to hire a business manager to run the existing businesses and stay out of them, just stick to developing new ones. Of course, he isn't as smart as he lets on to be as he thinks he is so it won't happen.

FTFY

 

[Endymio]

...this is at the same time anything related [sic] to Musk is in trouble as Twitter appears to have a fairly good case against him.

Not nearly as good as the Twitter board has portrayed it, especially given the volume of contradictory statements they've made since the saga began. Will a Delaware court agree there's been a material adverse event since the deal was signed, or that Twitter indeed has been misrepresenting its mDAU figures? Even if not, the most likely result is that Musk pays the $1B penalty -- then repurchases the company at its new, lower stock price at a savings far in excess of $1B.

So before you buy a Tesla or subscribe to Starlink you might want to you know, test the waters for a few more months just to make sure they both don't just implode into nothingness.

Tesla has sold more EVs than all other automakers combined. Furthermore, the notion that either Tesla or Starlink would be somehow magically impacted by a personal ruling against Musk is extraordinarily naive. You understand what the concept of incorporation entails, right? Starlink is owned by SpaceX, and Musk (technically, the "Musk Revocable Trust") owns less than 50% of SpaceX. There are a many other hands on that pie.

 

[umbala]

While people assume this is just the dump part of the pump & dump for Tesla's coin holdings, this is at the same time anything related to Musk is in trouble as Twitter appears to have a fairly good case against him.

So before you buy a Tesla or subscribe to Starlink you might want to you know, test the waters for a few more months just to make sure they both don't just implode into nothingness.

In the case of Tesla however, it's likely he could easily get some public money bailout but not if he's fought against in court for his behavior so even that is no guarantee.

This is utter nonsense. Yes, the value of Tesla may drop as many tech companies will be suffering in the coming months/years, but they're not going to collapse or disappear overnight. Anyone who thinks that is just fearmongering. I would be far more worried about any crypto holdings people may have. Now THAT could collapse to nothing overnight.

 

[umbala]

Ah yes, the tried and true tactic of buying high and selling low. Musk really is a genius... oh wait.

What this article doesn't mention is how much money Tesla lost on their little Bitcon (not a typo, that junk really is just a "con") experiment. Wouldn't be too hard to figure out though, just a quick Google search reveals "The closing price for Bitcoin (BTC) in February 2021 was $45,068.05."

[edit] A quick estimate on their loss, since I'm curious. They bought $1.5 billion worth last year, but then sold 10% of it, leaving about $1.35b worth. Then today they sold 75% of that, which is around $1 billion. The value dropped by roughly 50% since they bought it, so they lost around $500 million on their little adventure.

 

[terzaerian]

Ah yes, the tried and true tactic of buying high and selling low. Musk really is a genius... oh wait.

What this article doesn't mention is how much money Tesla lost on their little Bitcon (not a typo, that junk really is just a "con") experiment. Wouldn't be too hard to figure out though, just a quick Google search reveals "The closing price for Bitcoin (BTC) in February 2021 was $45,068.05."

It does, in the first paragraph; they bought 1.5 billion worth around 50k, and sold 75% of it now around 20k for 936 million. 75% of 1.5 billion is 1.1 billion, so safe to assume a loss of around 200 million.

I know math is elusive to you crypto haters.

 

[VitalyT]

Bitcoin's price has fallen over the last few hours following a week of mild resurgence after Tesla revealed it had sold 75% of its BTC holdings.

Where did you get this nonsense? Tesla sold 75% of its BTC holdings months ago, and the news that recirculated it didn't make any change in BTC trading. Terrible homework, as in none.